Budget 2022: Ticks of approval for ‘positive initial steps’

Ratings agencies have provided a tick of approval to the first Labor budget in almost a decade, and predicted further revenue windfalls as commodity prices stay high.

S&P Global Ratings analyst Anthony Walker says ‘for a new government, (the budget) is quite restrained’. Picture: Getty Images

Ratings agencies have provided a tick of approval to the first Labor budget in almost a decade, and predicted further revenue windfalls as commodity prices stay higher than Treasury’s conservative forecasts.

S&P Global Ratings analyst Anthony Walker said “for a new government, (the budget) is quite restrained – there’s not a lot of new spending from policy ­decisions … The government has tried to fund new policy decisions through savings and redirecting spending rather than new borrowing or new taxes.

“From what we are seeing, the budget won’t add greatly to inflationary pressures; we’re not seeing large cost of living measures.”

Moody’s Investors Service analyst Martin Petch said there was no change to its Aaa credit rating for Australia, but improving the country’s productivity performance would be “critical” to repairing the budget over the longer term.

“(The) commonwealth budget is a positive initial step towards repair of Australia’s fiscal metrics, albeit with significant medium-term challenges to sustaining that improvement and stabilising and reducing general government debt,” he said.

“The downwards revisions to the underlying cash balance and gross debt outlook over the forward estimates period to a significant degree reflect better than expected revenues notably driven by a strong labour market and commodity prices.

“As revenue strength wanes, it will be important spending, particularly relating to long-term policy issues including the National Disability Insurance Scheme, health and defence, are managed effectively.”

Mr Walker said “rising debt levels and interest payments do not currently present a risk to our ‘AAA’ rating by themselves. The nation’s net debt of 30-35 per cent of GDP is comparable to similarly rated peers”.

He said S&P’s commodity price forecasts were “quite a bit stronger than in the budget … and should lead to stronger terms of trade, nominal GDP, higher tax revenues and better fiscal outcomes than the budget indicates”.