Australia's coveted triple-A rating still at risk: report

Australia's coveted triple-A credit rating is still at risk despite an uptick in commodity prices, with Deloitte Access Economics forecasting a 24 billion Australian dollar budget blackhole over four years, caused by low wage and employment growth.

Global ratings agencies have warned Australia a halt to ballooning government spending was not enough to ensure sovereign AAA ratings were maintained, arguing revenue raising measures are also needed to curb growing debt which was "credit negative".

But the sharp rise in coal and iron ore prices wont be enough to offset weak wages growth -- the largest single component of Australia's national income -- resulting in a budget deficit of 40.5 billion Australian dollars (29.65 billion U.S. dollars) in fiscal 2016/17, more than the 37.1 billion Australian dollars (27.16 billion U.S. dollars) forecasted in the May budget, the Deloitte report said.

"There was a hope that the pickup in commodity prices would remove that risk (of a ratings downgrade), but the weak wages growth we've been seeing indicates that risk remains," AMP Capital chief economist Shane Oliver told Xinhua on Monday.

"Initially the main factor leading to deterioration in Australia's budget outlook was the falling commodity prices, but now it's turned around, the risk has shifted to the labour market, the weakness in wages growth which is hitting personal tax collections and also corporate tax collections to some degree."

The deterioration in fiscal metrics will likely push back any planned returned to budget surplus over the forward estimates, likely beyond the 2020/21 financial year, a concern to ratings agencies. Under Deloitte's estimate, the 2019/20 fiscal year will have a budget deficit of 15.9 billion Australian dollars (11.64 billion U.S. dollars), than the six billion Australian dollars (4.39 billion U.S. dollars) forecasted before the return to surplus in 2020/21.

"With the ratings agencies already expressing concern about the budget position, any further blowout of this nature will put our hard-earned AAA credit rating at even more danger of being lost," Australia's shadow treasurer Chris Bowen and finance spokesman Jim Chalmers said in a joint statement.

The opposition political parties called for the government to scrap it's proposed 50 billion Australian dollar (36.60 billion U.S. dollar) corporate tax cut, which will be grandfathered in over 10 years.

Australian finance minister Mathias Cormann however said the tax cuts won't have a net negative impact on the budget.

"The government sees the corporate tax cuts as a long term reform, therefore they would worry that if they don't do them then it adversely affects economic growth on a longer term basis which can then make the budget even worse," Oliver said, noting the cuts for large companies won't come into effect well into the next decade.

The government's political opposition however is also to blame. It's believed up to 19 billion Australian dollars (13.91 billion U.S. dollars) in savings measures are currently being blocked in parliament.

Government policy changes which include paid parental leave, the "backpacker tax" and superannuation refroms are also not helping, Deloitte economist and budget watcher Chris Richardson said.

"The overall story on spending remains one of the continuing cost of failing to get a backlog of measures through parliament, topped up by a soupcon of new measures," Richardson said.

Australian Treasurer Scott Morrison will deliver the nation's mid-year economic update on December 19. Endit