Powered by MOMENTUM MEDIA
subscribe to our newsletter

Moody’s issues federal budget warning

Treasurer Scott Morrison’s refusal to raise revenues in the federal budget will make it difficult for Australia to balance its budget, amounting to a ‘credit negative’ for Australia, warns Moody’s Investors Service.

In its latest credit outlook, Moody’s noted Mr Morrison’s focus on curbing spending rather than raising revenue.

“Given previous difficulties in reducing welfare benefits [in the 2014 federal budget], actual spending cuts may be modest,” it said.

“Without [revenue raising] measures, limited spending cuts are unlikely to meaningfully advance the government’s aim of balanced finances by the fiscal year ending June 2021 and government debt will likely continue to climb – a credit negative for Australia.”

Australia may have favourable fiscal metrics relative to its AAA-rated peers, but it has had a “prolonged and marked increase in government debt over the past decade”, Moody’s said.

Advertisement
Advertisement

PROMOTED CONTENT


“During a period of relatively strong GDP growth, Australia’s government debt has risen to 35.1 per cent of GDP in fiscal 2015 from 11.6 per cent 10 years earlier.

“We expect government debt to increase further to around 38 per cent of GDP in fiscal 2018,” the ratings house said.

“The 3 May budget will provide more detail on measures aimed at limiting expenditure growth.

“However, the government’s pledge to curb spending will be tested by significant spending commitments on welfare, education and health.”

Moody’s said that despite a consensus on fiscal consolidation through successive administrations, the government has been unable to reduce expenditures to “significantly below” 36.5 per cent of GDP since 2009.

[Related: Investor loans at risk of default, says Moody’s]

Moody’s issues federal budget warning
mortgagebusiness

Latest News

Housing finance commitments have reached above decade averages in seven states and territories, and above year-ago levels in all economies, ...

The median house price in the Tasmanian capital surged by 16 per cent in a year, reaching record highs in the September quarter, new data fr...

The major bank is offering SMEs a new equipment loan under the second phase of the Coronavirus SME Guarantee Scheme. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Court cases and penalties

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.