Australian Finance Minister confident in maintaining AAA credit rating

Finance Minister Simon Birmingham is confident that Australia will maintain its AAA credit rating after the government announced a large spending program last week following the announcement of the federal budget for 2021-22.

Senator Birmingham replied, “I don’t expect that to happen,” when asked if the government would be held responsible for possible credit rating downgrades after the budget was announced.

“The rating agencies themselves issued a statement last week in their own words that they are very positive about the government’s strategy and the approach we are taking in this budget,” he told Sky News Australia.

Three major global credit agencies, Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, all rate Australia as AAA, the latter two showing negative outlook for Australia’s recent performance.

Credit ratings are important because downgrades increase the cost of borrowing funds from foreign markets for Australian governments, businesses and banks. These additional costs are then passed on to the consumer.

Epoch Times Photo
On May 11, 2021, Finance Ministers Josh Frydenberg and Simon Birmingham submitted a 2021 budget document at the Parliament Building in Canberra, Australia. (Domini Chlorima-Pool / Getty Images)

However, in response to a federal budget speech last week, Fitch Ratings said it believed that the government’s large spending initiative would be rewarded and likely to exceed expectations.

“Given the relatively conservative assumptions about iron ore prices and employment, we believe that public finances can overperform compared to budget expectations.” statement Said from Fitch Ratings.

They also expect the government to rewind spending in fiscal year 2023 after the unemployment rate falls below 5%. This is a benchmark set by Treasury Secretary Josh Frydenberg.

Last week, Frydenberg announced a new spending measure of about $ 100 billion to spur the Australian economy and reduce unemployment.

“There is no economic recovery without job recovery, and there is no budget recovery without job recovery,” he told the National Press Club in a post-budget speech.

The budget included funding for several sectors such as health care, elderly care, mental health, women’s services and education. It also included tax deductions for low- and middle-income earners and extended depreciation of assets for businesses.

Commonwealth Labor Shadow Treasury Officer Jim Charmers claimed that the budget left too many segments of society.

“Returning to the types of inequality and immobility that characterize the eight-year tenure of liberals is not a recovery,” Chalmers told attendees at an event of the Australian Council of Social Services.

In a federal opposition budget response, Labor leader Anthony Albanese said the government’s budget “missed an opportunity” for Australia and claimed it was just “a pity for eight years of liberal neglect.” did.

However, Albanese did not deny many of Frydenberg’s spending measures in exchange for announcing a new initiative, including $ 10 billion, for $ 10 billion in 30,000 public housing over the next five years.

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