AAA rating at risk if spending not cut: ACCI

Triple A credit rating

The ACCI say the government continuing to borrow $100 million a day will result in an AAA rating downgrade and higher interest rates

Treasurer Scott Morrison says his first May budget must continue to get spending under control, as a leading business lobby group warned that doing nothing will eventually put the nation’s AAA rating at risk.

Mr Morrison will get the chance to lay out his budget framework and his progress on forming his tax-reform package when he addresses the National Press Club on Wednesday.

Last December’s mid-year budget review showed forecast government payments at 25.9% of gross domestic product, easing to 25.3% by 2018/19.

‘You can’t have lower taxes if you can’t control spending,’ Mr Morrison told Sydney’s 2GB radio on Monday.

The Australian Chamber of Commerce and Industry chief executive Kate Carnell said expenditure needs to get under 25% of GDP.

‘Unless that’s achieved it will be impossible to bring the budget back into balance,’ Ms Carnell told reporters in Canberra.

Releasing the chamber’s pre-budget submission, she said the government is borrowing $100 million a day and at some point in the future that’s going to hit a brick wall, resulting in a credit rating downgrade and higher interest rates.

‘That’s unacceptable … if Australia waits until the system breaks we will consign the next generation to readjustments like those implemented recently in Greece and Spain,’ she said.

She says family tax benefit part ‘B’ should be scrapped, raising $13.9 billion over four years and a means-tested child care benefit scheme would save $250 million a year.

The chamber has also proposed transforming pension payments to owner-occupiers into a loan that would be recoverable against their property when it is sold.

‘Changes to the age pension could foster innovative financing solutions that guarantee that pensioners can remain in their homes and still save billions of dollars from spending,’ Ms Carnell said.

There must be community support to fixing the nation’s spending problem and early action will give the government more time to phase in changes.

‘Focusing on delivering outcomes efficiently rather than reducing services or shifting costs will also make reform easier,’ she said.