Chilling warning for Australia's future as Albo's government spending spree takes its toll

Anthony Albanese has been warned high government spending and Budget deficits for the next decade could jeopardise Australia's crucial credit rating.

Government payments are set to reach $777.5billion in 2025-26, making up 27 per cent of gross domestic product.

Outside of the pandemic, the level of spending is the highest proportion of the nation's economy since 1986.

Treasury is also predicting Budget deficits for the decade ahead, with government debt climbing above $1trillion in the next financial year as costs blow out in the National Disability Insurance Scheme.

High government spending is a problem

Now credit ratings agency Moody's has warned unsustainably high government spending is a threat to Australia's AAA stable credit rating if steps aren't taken to address tax issues.

Treasurer Jim Chalmers has made boosting productivity a priority but Moody's has suggested tackling Budget deficit.

There is no return to surplus forecast in coming years, as an economic slowdown in China, Australia's biggest trading partner, weakened iron ore price and eroded federal company tax revenue.

Beyond productivity, the key challenges facing the new Albanese Government are to advance Budget repair,' Moody's said.

'Notably constraining rising government spending in areas such as the National Disability Insurance Scheme, building affordable housing and broad infrastructure.

'Unconstrained spending pressures, in the absence of taxation reforms that broaden the tax base will put pressure on the fiscal metrics, a credit negative.

'Further fiscal consolidation at the federal government level would offset the sharp increases in fiscal deficits and debt at state government level, reducing pressure on the outlook for the sovereign rating.'

Budget deficits forecast

Treasury's pre-election March forecast a $42.1billion Budget deficit for 2025-26, making up 1.5 per cent of GDP.

Fitch warned Budget deficits, making up one per cent of GDP, were likely in the coming decade.

'We forecast modest fiscal consolidation thereafter but expect persistent fiscal deficits of around one per cent of GDP over the medium term,' it said.

'Increased spending on the National Disability Insurance Scheme, aged care and healthcare could widen deficits, but we anticipate efforts by the new government to manage these structural pressures.'

Government debt of $1trillion

Gross government debt is forecast to climb above $1trillion during the next financial year.

That's equal to 35.5 per cent of GDP, but once state government debt for new transport infrastructure is added, the figure soars to more than 50 per cent of the economy.

'Australia's fiscal deficits and debt at around 50 per cent of GDP are both high compared with other "AAA" rated peers,' Fitch said.

Fitch warned rising debt levels could jeopardise Australia's credit rating.

Harder for Australia to borrow money

A weaker credit ratings makes it harder for the Australian government to borrow money to finance its programs.

That leads to a rise in government bond yields, where investors are paid higher annual interest payments to entice them to lend money to Australia.

'In November we stated that a sustained upward trend in the general government debt ratio over the medium term could put downward pressure on Australia's rating,' Fitch said.

'This could occur, for instance, if fiscal consolidation stalls or economic growth is significantly weaker than we expect under our baseline.

'The government's ability to address structural fiscal spending pressures or lift productivity through reforms could have an important influence on growth and fiscal outturns.'

https://www.msn.com/en-my/news/other/chilli...6711efbf8&ei=15

to win election

problem is double standards, if Australia same place as Merehsia, would have kena AA long ago.

wow not even singapore is AAA ?

so solution is to throw subsidy make them happy

australia dun deserve to be 1st world country

hope their AAA kena burn.