Roundup: Australia presses ahead with controversial austerity measures

Australia will pursue its controversial austerity measures in the next parliament in preparation for potential global shocks, hitting the hip pocket of ordinary Australians to favor big business.

Ongoing complacency in the government's fiscal repair could push Australia's national debt to reach 1 trillion Australian dollars (762.7 billion U.S. dollars) within 10 years, Australian Treasurer Scott Morrison warned on Thursday in a worst case scenario that would lead to its first recession in 25 years. Under alternative scenarios where some measures were passed, government debt would still blow out to 800 billion Australian dollars.

"Deficits are dismissed as temporary, cyclical and self-correcting. If it means payments and services are maintained, then deficits are ok, just increase the taxes or increase debt," Morrison said in a speech to Bloomberg in Sydney.

"The only problem is fewer people are paying the taxes, as our working age population contracts relative to the balance of our population, and our population ages."

Among the measures flagged include changes to a swath of Australian social services including child care and unemployment benefits, measures that have been stalled in Australia's parliament since 2012.

Morrison however challenged his political opposition to fulfil their own election promises on fiscal repair rather than taking a "wait and see" approach to potential shocks, a better alternative given the potential damage to economic fundamentals.

"I recognize that in the absence of a 'recession we have to have,' or the threat of 'becoming a banana republic,' achieving necessary change will be more frustrating and more difficult," Morrison said. "But it is no less necessary, and achieving it this way is far better than the alternative."

Australia's last recession saw unemployment above 10 percent, inflationary pressures become a problem, while households were repaying mortgages at 18 percent interest.

This is also why the central government is continuing to push its controversial plan to incrementally cut the corporate tax rate to 25 percent over the next decade, keeping recession at bay by increasing private levels of investment.

It's all a bid to shore up Australia's coveted triple-A credit rating for "when the storm hits," in a low growth, low inflation, low wages growth and volatile post-GFC world.

"Under the sorts of (global economic shock) scenarios that we all know could present, then we would be in the pack in terms of getting access to the capital we needed in those sorts of situations, and funding costs would obviously rise and the impact would be worse (if rating was downgraded)," Morrison said.

"That's why its worth doing everything we can to protect the triple-A credit rating, and that's why it's important to pass these measures through the parliament."

While global ratings agencies have affirmed Australia's outlook, the country's rating could come under pressure should evidence of economic resilience diminish, challenging the country's external financing, or hurdles to fiscal consolidation become higher than expected.

Essentially, the agencies are worried about the likely uncooperative Senate making it difficult for government to implement any serious, and much needed fiscal reforms. Reform measures must pass both the House of Representatives and Senate to become law.

Having the support of the opposition Labor Party would negate the power the uncooperative Senators and Members of the House of Representatives elected at the July 2 election. Endit