Scott Morrison has urged Labor to back his budget savings and not “play politics” with the nation’s banks after Moody’s affirmed Australia’s AAA rating.
The rating agency highlighted Australia’s economic resilience, saying the commonwealth was carrying a lower level of debt than its peers, and the economy’s long-term potential for growth was higher than most AAA-rated sovereigns.
The treasurer jumped on the news and said the new parliament must now support the Turnbull government’s attempts to reduce the budget deficit and avoid higher debt so the rating could be maintained.
Moody’s warned last month that it would be watching keenly for indications that the Coalition could work with the new Senate.
Its new assessment on Wednesday has underlined that point, saying it was clear the government faced “political hurdles” in its attempts to reduce spending because it was ruling with “a very thin majority in the House of Representatives and a splintered Senate”.
“Government debt has increased markedly from 19% of GDP in fiscal 2010. We expect it to rise further in the next few years, as fiscal consolidation proves challenging.
“In this background, we forecast government debt to rise to close to 41% of GDP by fiscal 2017 and to just under 45% by the end of the decade.
“However, Australia’s debt burden will remain consistent with a AAA rating, albeit rising and no longer low. For instance, the debt burden will be lower than some other AAA-rated sovereigns such as Canada or the Netherlands and not significantly higher than Sweden’s or Denmark’s (all AAA stable).”
It also pointed out that, at 36.1% of GDP in the year ending in June 2015, Australia’s general government debt was somewhat lower than the 38.1% median level of AAA-rated sovereigns.
Morrison said the credit rating underlined how important Australia’s banks were to the country’s economic stability, and he warned they were not fair game for politicians.
“You don’t go and play politics with that,” Morrison said, a reference to Labor’s calls for a banking royal commission.
“You don’t go messing around with the banking and financial system to make cheap political points.”
It was incumbent on the opposition to support the government’s budget measures to reduce the deficit, he said, and therefore keep the AAA rating.
The prime minister, Malcolm Turnbull, made a similar point on Wednesday during his first major economic address since the election, urging his political opponents to pass Coalition policies for the good of the economy. “This is not, and should not be, about ideology,” he said in a speech in Melbourne.
He also revealed plans to introduce an omnibus bill that would pull together the savings measures that Labor said it would support during the election campaign, worth more than $6bn.
The shadow treasurer, Chris Bowen, said Turnbull had not discussed that plan with Labor before announcing it, so he would like to look at the bill before he supported it in parliament.
“This is a stunt by Malcolm Turnbull to distract from his own internal problems,” Bowen said.
“I mean, he is lecturing the Labor party about the need for budget repair, [but] he can’t even get his own party to vote for superannuation reforms.”
Moody’s assessment followed a similar decision by Fitch Ratings last month to affirm Australia’s triple-A credit rating with a stable outlook.
