One of the big three global credit rating agencies, Standard and Poor’s (S&P), has weighed into the budget debate saying that it needs to see progress this year if Australia is to retain its Triple-A rating.
Craig Michaels, lead sovereign analyst for S&P, told the Australian Financial Review that Australia must make “some” progress in bringing its plans for $37 billion in savings this year.
Michaels said, “We’re looking to see the government improve budget performance over the next few years.”
But he then warned that if the current debate meant that:
sizeable budget deficits were considered acceptable at the political and the community level then we might reassess, certainly, government commitment and also potentially the trajectory for public sector debt
Which is simple credit rating agency speak for “we might take away your Triple-A rating”.
The key point for S&P is that Australia is different to the other Triple-A nations because of our external financing position. Part of this is a recognition that private sector debt held by the banks may one day become Australian government debt, were the banks to get into financial difficulties.
S&P’s comments will likely encourage the Treasurer and Prime Minister to double down on their efforts to convince tax payers they are doing the right thing for the future of the country.
Equally it provides a handy bit of ammunition when negotiating with Clive Palmer and the PUP Senators over their stated opposition to the passage of budget savings measures in the Senate.
You can read more here
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.