THE fate of Australia’s AAA credit rating could be know before Christmas — or even as soon as Monday afternoon.
Spokesmen for credit ratings agencies Moody’s and SP Global Ratings told The Australian Financial Review they could make a decision soon after the Federal Treasurer delivers the midyear budget update on Monday.
Speculation about a potential ratings drop flared last week when the national accounts figures showed Australia has just come through its worst quarter of economic growth since the Global Financial Crisis.
Deutsche Bank Australia chief economist Adam Boyton told Fairfax Media the Federal Government might never make it back to surplus.
Mr Boyton said Treasury had over-estimated its forecasts for nominal GDP growth and even a minor shortfall it its average 5 per cent a year estimate could mean the budget would never get back to surplus.
Meanwhile, the Coalition and Labor are locked in a battle over which savings measures should be used to repair the budget, with this financial year’s deficit currently expected to be $37 billion.
Shadow Finance Minister Jim Chalmers has accused the Government of playing political games, saying Labor had compromised on the so-called omnibus savings bill but would stand firm on cuts to education or Medicare.
The Opposition is pushing for the government to make changes to negative gearing and capital gains rather than go ahead with its proposed $48 billion company tax cut package.
“At the end of the day, the Government can keep is big business tax cut or Australia can keep its AAA credit rating but we can’t keep both,” he told Sky News.
Credit ratings agencies had “sounded the alarm bells over and over again” but Treasurer Scott Morrison refused to listen, he said.
Yesterday, it was Mr Morrison accusing the Opposition of sabotaging the budget.
“The Turnbull Government has a clear fiscal plan to return the budget to balance and it is important that this plan continue to be legislated,” he told a banking and finance conference in Sydney.
SP downgraded its long-term outlook for Australia from stable to negative in July, warning there was a one-in-three chance the country could lose its coveted AAA rating within two years if it failed to pass budget repair measures.