S&P Global Ratings has issued a warning that Australia's AAA sovereign credit rating could be at risk if election promises lead to increased structural deficits, debt, and interest costs. Analysts Anthony Walker and Martin Foo highlighted the fiscal pressures facing the next Australian government in a recent report. They noted that public spending has reached post-war highs amid global trade tensions and slowing economic growth, leading to a slight budget deficit.
As election campaigns heat up, major Australian political parties have pledged significant spending, including billions for new homes for first-time buyers, tax cuts, and increased healthcare funding. S&P also pointed out that over AUD 100 billion (USD 64 billion) in "off-budget" spending is expected from 2025 to 2029, raising further fiscal concerns.
Goldman Sachs recently commented that the fiscal policy of Australia's center-right opposition party might be more expansionary compared to the ruling Labor party. S&P analysts emphasized that decades of sound fiscal management have supported Australia's 'AAA' rating, ensuring strong debt metrics as a key rating advantage.
After achieving a surplus for two consecutive fiscal years, Australia is projected to return to a fiscal deficit by the fiscal year ending June 2025. State governments are also increasing expenditures, which could push the broad government fiscal deficit to 2%-2.5% of GDP, a level rarely seen since the global financial crisis, excluding pandemic-affected years.
