Gross federal government debt has now ballooned out to 28% of GDP. In December last year, Standard and Poor’s indicated that should federal and state debt reach 30% of GDP a downgrade in Australia’s AAA credit rating could be in the offing. Australia is among a select group of nine countries that currently enjoys this coveted position, the loss of which will not only reduce our nation’s creditworthiness but increase banks’ borrowing rates and impact personal mortgage loans and business investment.
Now the credit agency Moody’s has warned Treasurer Scott Morrison that spending cuts alone will not be enough to save this country’s superior credit status. Morrison will not budge despite similar warnings from CEDA (Commonwealth for Economic Development of Australia), suggesting tax increases were a necessary part of budget repair. This is reinforced by recent polls indicating that voters are prepared to pay more for the services they receive.
Morrison’s ‘Tea Party’ suggestion of tax cuts (albeit presently confined to companies) when there is insufficient revenue and no surplus in sight over the next decade, is foolhardy to say the least.