Australia risks downgrade of coveted AAA rating: treasury official

Australia risks a downgrade of its coveted credit rating unless the government takes action to improve its budgetary position, a treasury official has warned.

Australia needs to maintain its triple-A credit rating in order to service commonwealth debt, Treasury Secretary John Fraser told the Sydney Institute on Thursday night, noting interest payments run at just over 1 billion Australian dollars (708.04 million U.S. dollars) per month.

"This is projected to more than double within the decade, unless action is taken to improve our budgetary position," Fraser said in his keynote address.

Australia is just one of the 10 countries that possesses the coveted AAA rating from all three major global ratings houses.

"But this rating is dependent on credible fiscal consolidation and a smooth transition to a more diverse economy," Fraser warned.

Australia's national debt is forecasted to rise to 29 percent of GDP by 2018. However, global ratings houses stipulate to maintain its AAA rating, net government debt must be below 30 percent of GDP.

"We should not be complacent about this," Fraser warned, noting net debt is reaching levels not seen since the early 1990s.

Despite the nation is undergoing an economic transition away from mining-led growth to more sustainable and diversified industries, it is taking considerable time, causing falls in national revenue and Australia's terms of trade.

Local commentators have criticised the nation's economic mis-management over the past decade for instilling long-term social and spending programs built off revenue from the short-term mining boom. These programs have seen Australia's budget maintain a strong deficit since the Global Financial Crisis.

Fraser said its unacceptable current government spending is more than 25 percent of national income despite current tax receipts being "massively" lower than forecast just three years ago.

The Australian government is currently looking at a wide range of fiscal measures to improve the nation's budgetary stance, including significant reforms to the taxation system, however spending reforms should take precedence.

"Going forward, the more we can do to limit net new policy spending, the better," Fraser said, indicating the government needs to embed long-term savings that can be sustained to reduce government debt."

"Simply increasing the overall tax burden to raise more revenue is not the answer." Enditem