Australian Prime Minister Anthony Albanese gestures to the audience during the Labor party campaign launch ahead of the May 3 federal election, Perth, Australia, Sunday, April 13, 2025. (Lukas Coch/(AAP Image via AP)
SYDNEY: S&P Global Ratings has warned Australia’s prized AAA sovereign credit rating may be at risk if election campaign pledges result in larger structural deficits, debt and interest costs, highlighting fiscal pressures facing the next government.
“The budget is already regressing to moderate deficits as public spending hits post-war highs, global trade tensions intensify and growth slows,” analysts Anthony Walker and Martin Foo wrote in a note.
“How the elected government funds its campaign pledges and rising spending will be crucial for maintaining the rating.”
Australia’s major parties have made large spending commitments during a tight campaign ahead of Saturday’s election, from setting aside billions of dollars to build new homes for first-time buyers to tax cuts and higher health spending.
S&P also pointed to more than A$100bil (US$64bil) in “off-budget” spending that’s expected between fiscal 2025 and 2029 to reinforce its fiscal concerns.
Goldman Sachs Group Inc said last week that Australia’s fiscal policy is likely to be more expansionary under the centre-right opposition than the ruling Labor Party, highlighting the proliferation of election spending promises.
“Sound fiscal outcomes have ensured Australia’s debt metrics remain a key rating strength,” S&P analysts said. —Bloomberg
