Treasurer Scott Morrison promises to protect Australia’s AAA rating by sticking to plans to achieve balanced budget by 2020-21

In the aftermath of Standard and Poor’s changing Australia’s Triple A sovereign debt rating on Thursday to “negative” watch from stable, Treasurer Scott Morrison says it is a wake-up call for Parliament for the country to rein in its debt and deficit. To protect the AAA rating, he promised to keep with the plan to have a balanced budget by 2020-21.

Morrison says he has no intention of postponing the speed of fiscal consolidation. “Any easing in the pace of fiscal consolidation or contraction, any increase as a result of policy decisions that would see the deficit increased over the next few years, I think S&P are making it clear what their view about that would be,” Australian Finance Review quotes the treasurer.

Shadow treasurer Chris Bowe is blaming the Coalition’s policy agenda and unstable Parliament for the ratings agency’s action. He says the Coalition should raise taxes, as proposed by Labor, to curb the negative gearing, hike capital gains deductions for investors and remove unfunded company tax cuts.

Bowen notes that without remedial action, the government’s fiscal stance could no longer be compatible with Australia’s high level of external indebtedness.

S&P said it will continue to monitor the success or failure of the new government’s ability to pass revenue and expenditure measures over the next six to 12 months in both houses of Parliament. The agency added it could lower the rating if Australia’s external position would further weaken.

S&P also downgraded Defence Housing Australia (DHA) due to the July 2 indecisive election result, reports the Sydney Morning Herald. Because of the extremely high likelihood the Australian government would provide extraordinary support to DHA – manager of a $10-bilion property portfolio used for purchase of defence force homes with 10-year rental guarantees and zero vacancy rates – S&P revised the outlook to “negative” and affirmed DHA’s AA+ rating.

VIDEO: Scott Morrison says increasing the deficit increases the debt