The Australian<\/a> that federal gross debt will surpass this massive benchmark by the first week of April.<\/p>\nThis arrives one month before Treasurer Jim Chalmers will deliver his budget where spending cuts and new sources of revenue are anticipated.<\/p>\n
Gross debt was forecast to hit $993b by the end of this financial year in Treasury\u2019s mid-year fiscal and economic update.<\/p>\n
The Australian Office of Financial Management has already noted this level has been surpassed.<\/p>\n
AMP\u2019s chief economist Shane Oliver said a higher percentage of debt to GDP, which currently sits around 34 per cent in Australia, could force ratings agencies to downgrade the nation’s AAA credit rating.<\/p>\n
\u201cThe ratings agencies will want to see clearer evidence that the ratio of debt to GDP is stabilising and potentially starting to come down on a longer term basis,\u201d Mr Oliver told SkyNews.com.au.<\/p>\n
\u201cIf you see a deterioration in that outlook, that’s the sort of thing that could prompt a ratings downgrade.<\/p>\n
\u201cWhen you see ratings downgrades \u2026 it can mean each notch lower you go from AAA to AA- or AA+ \u2026 could add 20 to 30 basis points to the borrowing cost for the federal government.\u201d<\/p>\n
Australia currently holds a AAA credit rating from three leading firms: S&P Global, Moody\u2019s and Fitch Ratings.<\/p>\n
However, both S&P Global and Fitch voiced concerns that large public spending could threaten the nation\u2019s stellar rating.<\/p>\n
\u201cThe ‘AAA’ rating on Australia may be at risk if election promises result in larger, structural deficits, and debt and interest expenses rising more than we expect,” S&P wrote in the lead up to last year\u2019s election.<\/p>\n
Fitch\u2019s director of Asian Sovereign Ratings, Jeremy Zook said Australia\u2019s AAA rating in the was not at risk in the near term, but massive debt and looming deficits could pose problems in the medium term.<\/p>\n
\u201cWhen we think about the medium term, that’s where a lot of our focus will be,\u201d Mr Zook told Business Now in May.<\/p>\n
\u201cIf we see a sustained upward trend in Australia’s government debt, which is not our current baseline, but if we do see a situation where fiscal deficits remain high and growth underperforms and that adds challenges in terms of fiscal consolidation, that is where the risks could arise.”<\/p>\n
The 2025-26 budget deficit is on track to be $36.8b – about $5.3b lower than the election forecast.<\/p>\n
The fastest growing areas of spending include the NDIS, hospital payments, medical benefits payments, interest payments on debt and the childcare subsidy.<\/p>\n
Mr Oliver stressed Australia needed to ensure a \u201cgradually declining budget deficit\u201d to ensure Australia does not find itself at risk of a ratings downgrade.<\/p>\n
\u201cIt probably won’t get much worse from here if we manage to contain the size of the budget deficit and have it gradually falling as a share of GDP,\u201d he said.<\/p>\n
\u201cBut the big question is whether we’re able to do that because we have a history in Australia, like in recent years, that each budget update we see a high level of spending in the economy.\u201d<\/p>\n
Labor\u2019s budget will blow out by $57b over the coming decade due to higher hospital payments to the states alongside other unexplained spending increases planned by the Albanese government,\u00a0The Australian Financial Review<\/a>\u00a0reported at the start of February.<\/p>\nMr Chalmers\u2019 large spending agenda faced heated criticism after the Reserve Bank of Australia hiked the cash rate last week.<\/p>\n
RBA governor Michele Bullock was forced to admit public spending had contributed to inflation and the hike after Mr Chalmers repeatedly said Labor\u2019s spending did not play a role.<\/p>\n","protected":false},"excerpt":{"rendered":"Labor has been warned it may face higher borrowing costs if its spendathon continues, as government debt is…\n","protected":false},"author":2,"featured_media":482528,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[244573,244572,64,63,99,164,42086,1788,5716,37652,50850],"class_list":["post-482527","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-adam-donaldson","tag-amp-shane-oliver","tag-au","tag-australia","tag-business","tag-economy","tag-jim-chalmers","tag-labor","tag-shane-oliver","tag-treasurer","tag-treasurer-jim-chalmers"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/482527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=482527"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/482527\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/482528"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=482527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=482527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=482527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}