Scott Morrison’s joy of an unexpected drop in the jobless rate will have been quickly dashed by a stark warning that Australia’s triple-A credit rating could be at risk after his first budget.
One of the world’s major credit rating agencies is not happy with what it is hearing from the treasurer just weeks out from the May 3 budget.
Moody’s Investors Service notes the treasurer has excluded revenue-raising measures when talking about his budget aims, and given the government’s previous difficulties in reducing welfare benefits, it believes actual spending cuts may be modest.
“Without such measures, limited spending cuts are unlikely to meaningfully advance the government’s aim of balanced finances by the fiscal year ending June 2021 and government debt will likely continue to climb, a credit negative for Australia,” Moody’s says.
A credit downgrade would hit confidence while lifting borrowing costs abroad for the government and big business, which, in turn, would be passed on to consumers.
Shadow treasurer Chris Bowen said the agency’s comment was a wake-up call for Mr Morrison.
“Stop playing games, start governing. We’ve been saying for a long time now that tough decisions are necessary on revenue and spending,” he told reporters in Sydney on Thursday.
But Mr Morrison said the best way to protect the rating was to deliver a strong budget that backed growth and jobs in the economy.
“The government doesn’t believe that what has been put out today is a licence to tax Australians more,” the treasurer told reporters in his southern Sydney electorate.
But it was a reminder of the need to continue to consolidate the budget, reduce the deficit and over time that would reduce the debt.
“Our plan is to see revenue rises through growth and ensuring a better targeted tax system,” Mr Morrison said.
There was some good news on employment front with the jobless rate unexpectedly dropping to 5.7 per cent, its lowest level since the Coalition came to power in September 2013.
Economists had predicted a rise to 5.9 per cent from 5.8 per cent.
The total number of people in employment also rose by a larger-than-expected 26,100.
“So when a Coalition government is able to implement its economic agenda, you can clearly see it’s one of job growth and job creation,” Employment Minister Michaelia Cash told reporters in Perth.
Commonwealth Securities economist Savanth Sebastian said the drop in the jobless rate would provide a big boost to confidence among consumers.
“As we saw over the latter part of 2015, job security plays a big part in household consumption,” he said.
Consumer confidence has been under a cloud in recent weeks ahead of the budget and a possible election on July 2.