- POSTED: 13 May 2014 23:47
Credit agency Standard & Poor's on Tuesday said Australia's AAA rating with a stable outlook was not in danger after the conservative government's maiden budget, describing it as consistent with prudent management.
CANBERRA: Credit agency Standard & Poor's on Tuesday said Australia's AAA rating with a stable outlook was not in danger after the conservative government's maiden budget, describing it as consistent with prudent management.
Australia is one of only a handful of nations to hold the top rating and S&P said its stance was not changed by a budget that aims to cut the deficit from its current A$49.9 billion (US$46.6 billion) to A$29.8 billion next year.
"The government's spending measures include reductions in welfare entitlements, as well as cuts to federal government programmes and its workforce," it said.
"These cuts won't come fully into effect until the later years of the budget's four-year projection period -- a move that should leave intact the budding recovery in the non-mining sectors of the economy."
The agency welcomed a plan to raise the pension age to 70 by 2035 as tackling "more distant pressures", as well as a decision to raise revenue through a temporary tax rise for high-income earners.
"Overall, this budget, along with the nature of the current political debate, is consistent with our view of strong political commitment to prudent budget finances," S&P said.
"We consider there to be potential for further revenue write-downs, given the current importance of Australia's terms of trade to the government's revenue base and the inherent difficulty in forecasting its trajectory."
Australia was the only advanced nation to dodge recession during the global downturn but is currently in the midst of a major transformation as an Asian-driven mining investment boom winds down.
The budget forecast a narrowing of the deficit to A$17.1 billion in 2015/16. It projected it to be A$2.8 billion by 2017/18 and to reach a surplus around the end of the decade.
It said the economy would continue growing below trend at 2.5 per cent in 2014/15, but accelerate to 3.0 per cent in 2015/16.