Fitch says the Coalition's weak election win just adds more uncertainty

Crawling through mud during Toughmudder at Phillip Island, Victoria. Quinn Rooney/Getty Images

Fitch Ratings says the slim margin election victory for the coalition will make policy decisions and reducing debt more of a challenge than the previous parliament.

The fiscal and major policy outlook could be altered with the government reduced to a slim majority in the House of Representatives and the Senate results still to be finalised.

The Coalition is projected to lose 14 seats in the July 2 election but will form government with 76 of 150 seats.

In the Senate, preliminary results indicate the coalition has lost seats which may increase risks to government policy implementation, including the job of reducing the budget deficit.

Fitch says a credible long-term fiscal consolidation strategy remains a key sovereign rating consideration for Australia.

“Both the Coalition and Labor have expressed support for sound fiscal management, but have disagreed over the policy mix to achieve this objective,” Fitch says.

“The inability to find political agreement has contributed to a slower pace of fiscal repair than projected in previous budgets. It remains to be seen whether the fiscal outlook will be altered by the new balance of power in parliament.”

Fitch says proposed changes by the coalition to superannuation and corporate tax could be altered or blocked in he new parliament.

Australia has had six prime ministers in the past five years.

Credit rating agency Standard and Poor’s last weeks placed Australia’s AAA rating on credit watch negative from its previously stable outlook.

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