Fraser issues AAA warning
Treasury secretary John Fraser has warned that Australia’s prized AAA credit rating could slip.
Mr Fraser spokes at the Sydney Institute this week, and warned that the Federal Government must work hard to maintain its rating by cutting spending.
“I know it's self-evident, but it's important that Australia maintain its top credit rating which helps contain the costs associated with servicing public debt,” Mr Fraser said.
“But this rating is dependent on credible fiscal consolidation and a smooth transition to a more diverse economy.”
Australia is one of just 10 countries that hold a “rolled gold” AAA credit rating from the three major ratings agencies - Standard & Poor's, Moody's and Fitch.
Australia kept its AAA status during the global financial crisis while Britain and France were downgraded a notch amid the eurozone debt crisis.
Mr Fraser did not say a downgrade was imminent, but that complacency was dangerous.
“We should not be complacent about this. I know from personal experience during the financial crisis how important a strong credit rating is to investor confidence,” he added.
Prime Minister Malcolm Turnbull was keen to highlight that detail.
“He didn't say that our AAA rating was at risk, the media have written that up perhaps a little bit more sensationally than it warranted,” he told reporters.
“At the time of MYEFO ... which is the halfway review of where the budget's tracking, the ratings agencies were very impressed and gave a very positive review of the Government's strategy to move back into fiscal balance.”
Mr Fraser said that Australia’s problems arose well before the global financial crisis.
Since 2007, federal spending increased by an average 3.5 per cent, Fraser said, compared to 3 per cent in the 1990s.