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Australian gov't doesn't rule out tax hike in order to maintain AAA credit rating

Xinhua, February 16, 2017 Adjust font size:

The Australian government may need to raise taxes in order to maintain its at-risk AAA rating with the world's three big credit ratings agencies, Treasurer Scott Morrison has hinted on Thursday.

As the government begins to turn its attention to the 2017 federal budget, set to be handed down in May, the Treasury department has hinted that it might need to raise taxes to plug the budget black hole after Senate rejected the government's childcare welfare and omnibus bill which would have saved more than 3 billion U.S. dollars.

Morrison told Fairfax Media that the credit ratings agencies had "made their position clear" about Australia's AAA rating, and that the government was not ruling anything in its push to get some savings into the budget.

"The menu of options is well known. Our projection to return the budget to balance in 2021 is dependent on a number of things," he told Fairfax Media.

"Some are outside our control like wages, commodity prices, inflation and economic growth, but the other thing it depends on is the 10.2 billion U.S. dollars in savings in our budget.

"We will exhaust every option we have to deal with the expenditure problem we have. Once that is done, the budget will then be framed."

Morrison said the government needed to convince the Senate to pass key savings in order to avoid tax hikes, and vowed to work constructively with the Upper House to ensure Australia's credit rating remained strong.

"The government will frame the budget taking into account the decisions (on the savings measures) of the Senate. The budget has to be framed against the backdrop of where that process leaves us as at the end of March," the Treasurer said.

Despite Morrison's revelations, Australia's Prime Minister, Malcolm Turnbull moved quickly to dispel rumors the nations capital gains tax would be affected, saying the government was a "party of lower taxes".

"(We support) investment, supporting employment and bringing the budget back into balance," Turnbull told the press on Thursday.

Meanwhile Deloitte Access Economics' Chris Richardson told Fairfax that while Australia's AAA credit rating was still at-risk, the government could take "some comfort" knowing that high prices for resources such as iron ore was giving Australia some "breathing room". Endit