Global credit rating agency Standard & Poor's says the recovery in Australia's budget position is in line with expectations, but warns there are still downside risks to the nation's top-tier AAA rating.
Treasurer Josh Frydenberg's third budget released on Tuesday predicts a deficit of $161 billion for 2020/21, compared to the $197.7 billion forecast in the mid-year budget review released in December.
For 2021/22, the deficit is now seen at $106.6 billion, only a shade smaller than the $108.5 billion previously forecast.
"Today's budget confirms that the pandemic, and the government's response, will have a huge effect on fiscal outcomes relative to the pre-pandemic trajectory," S&P said shortly after the budget was handed down.
"Unsurprisingly, the fiscal 2020-2021 year will take the brunt of the hit. In our view, trade tensions and geopolitical risks are also likely to hinder parts of the economy."
Australia's remains on a negative outlook, "reflecting a substantial deterioration of fiscal headroom at the 'AAA' rating level and our view that risks remain tilted toward the downside".
