The Turnbull Government welcomes the announcement today that Standard & Poor’s (S&P) has once again affirmed Australia’s AAA credit rating, following the release of the Government’s Mid Year Economic and Fiscal Outlook (MYEFO) last December.
Together with Australia’s AAA rating from Fitch and Moody’s, this means Australia continues to be one of only 10 countries that have maintained a AAA credit rating with all three major ratings agencies.
Last year’s MYEFO showed a $6 billion improvement in the current year’s Budget, with the Government’s decisions on controlling expenditure starting to kick in. This strengthened the projected return to surplus in 2020-21 and reduced the expected peak in net debt in 2018-19 by $11.9 billion, falling thereafter. MYEFO also revealed that from the current year, the Government would no longer be raising new borrowings to fund everyday expenditure.
In the report released today S&P note that their Rating Committee agreed Australia’s ‘fiscal performance and flexibility had improved’, with ‘all other key rating factors unchanged’.
This is clear recognition of the progress we have made as a Government to restore the budget to balance and maintain the timetable for doing so in 2020-21, as highlighted again in the December MYEFO statement. This was the fifth successive budget update that confirmed this timetable.
We have managed to achieve this at the same time we are funding critical essential services Australians rely on, such as Medicare and the NDIS.
It is pleasing that S&P have joined the other agencies in recognising the progress we have been making, despite the Labor Party, who continue to try and frustrate our budget repair efforts.
In fact, such obstructionism is again highlighted as a risk to Australia’s credit rating going forward. The report notes that “enacting further savings and revenue policies could remain a challenge, given the Senate’s unwillingness in recent years to legislate many of the Government’s fiscal policy measures or doing so after considerable delay”.
This sounds yet another warning to Labor and other Parties as the Parliament returns next month to cease sabotaging the Government’s plan to bring the budget back into balance on schedule, or by their own actions they risk a credit downgrade.
S&P’s statement further exposes Bill Shorten and Labor’s hollow fear campaign on the Government’s plans to boost jobs and wages of Australians by providing tax relief to Australian businesses.
Labor’s suggestion that somehow we have to choose between keeping company tax cuts, or keeping our AAA credit rating has been exposed as nonsense. We have kept both, with no help from Labor.
S&P’s report also flags the need for continued care and sensitivity in relation to our housing markets, especially in Sydney and Melbourne. A hard landing in these markets would clearly cause wider economic damage, with S&P warning of “negative consequences for financial stability”.
In response, the Government has acted responsibly by supporting calibrated measures by the Australian Prudential Regulation Authority (APRA) to curb investor lending which has taken the heat out of the housing market, particularly in Sydney and Melbourne. Through the year dwelling price growth in Sydney, following the introduction of the most recent measures fell from a peak of 17 per cent in May to just 3 per cent at the end of December. That is a significant movement in a short period of time from a very subtle policy measure.
These prudent measures have been widely acclaimed as being the right policy response to managing this sensitive issue.
Labor’s drastic policies of abolishing negative gearing, which has been part of our housing markets for a century, and increasing capital gains tax, would clearly have a more substantial and dislocating impact, placing more than just our credit rating at risk.
The Coalition Government will continue to stand up against the risks posed by Labor while remaining focussed on responsibly acting to ensure the ongoing strength of the Australian economy and sustainability of the Budget.
Source: The Commonwealth of Australia