Economists believe there is a 50/50 chance Australia’s credit rating will be downgraded after MYEFO.
SCOTT Morrison won’t be shelving any of its election commitments despite a deteriorating budget position, as a 50/50 risk of Australia losing its triple-A rating still looms.
But the coalition needed partners in the parliament to help it return the budget to balance.
Mr Morrison will be hoping global credit rating agencies will be just as forgiving when he hands down his midyear budget review today.
Speaking to reporters in Canberra, Mr Morrison said the government would come good on all its election commitments, but in a way that did not retreat from the job of budget repair.
The government could put forward savings measures “as we do” but they needed parliament’s support to ensure the trajectory of returning the budget to balance was maintained.
Mr Morrison said Australia faced very difficult fiscal and economic challenges.
“I think we need … a strong wake-up call about the need to understand the depth of these challenges,” he said.
Mr Morrison said the update was a careful document that took into account many things that had happened during the past five to six months, including major shifts in commodity prices and negative growth in the September quarter.
“This shows a very prudent, a conservative and responsible outlook of the Australian economy.”
His comments come as survey has found two out of three Australians think budget deficits are okay in certain circumstances.
However, economists believe there is a 50/50 risk of the nation losing its triple-A rating if the budget has deteriorated since May as to delay a projected surplus in 2021.
A downgrade would hit confidence, raise borrowing costs and be a huge embarrassment for the government.
Finance Minister Mathias Cormann won’t say whether the surplus prediction still stands.
“We have been working for sometime to get spending under control, to get the budget back into balance as soon as possible and we have been making progress at every budget and budget update,” he told Sky News on Sunday.
Credit rating agencies have repeatedly warned Australia’s top-tier rating would be at risk if sufficient headway is not made in repairing the nation’s finances. Senator Cormann conceded the potential revenue boost from a surge in iron ore and coking coal prices won’t be enough to offset the decline in tax receipts through slow wage and company profits growth.
It suggests the forecast 2016/17 budget deficit of $37.1 billion will be even bigger Economists also believe the 2016/17 economic growth forecast of 2.5 per cent will be lowered after the recent national accounts showing the economy went backwards, postings its worst performance since the 2008-2009 global financial crisis.
A survey by Chartered Accountants Australia and New Zealand found 66 per cent of respondents said budget deficits were acceptable.
However, the polling suggests people think the government’s strategy of cutting spending to reduce the deficit is the wrong.
Two in five (42 per cent) said it should be addressed by removing existing tax breaks, while just 21 per cent favoured spending cuts.
“People want to see meaningful reform of tax breaks over simply cutting funding from major programs,” Chartered Accountants head policy leader Geraldine Magarey said.
Chartered Accountants have previously called for an independent monitoring of the budget, such as through the Parliamentary Budget Office. Mr Morrison and Senator Cormann will jointly release the midyear economic and fiscal outlook at midday.