Tuesday, June 14, 2016

AAA rating in jeopardy without budget repair, CEDA warns

A leading business-backed economic think tank has warned that Australia's prized AAA credit rating is in jeopardy without serious budget repair.

The Committee for Economic Development of Australia (CEDA) has raised the prospect of a downgrade to Australia's sovereign rating as both the Coalition and Labor adjust their economic plans to return the budget to surplus.

Three weeks out from the election, CEDA's chief executive Professor Stephen Martin has told AM the AAA rating could be in the balance unless both major parties need to deliver sustainable and holistic plans to drive growth over the next four years.

"There is no doubt that if we continue to let the budget deficit slip year in and year out that the ratings agencies are going to look at Australia and say you're not serious about trying to get your budget back into balance," Professor Martin said.

"It doesn't matter who happens to be the government. Government must make the hard decisions to  that will get the budget back into balance sooner.

"That's a problem you can then put to bed and then you can embrace the real change issues that will see us set sail for growth."    

The warning is contained in a CEDA report out today which says time is running out for both major parties to convince voters that they have a winnable and workable plan for the economy.

The report also says policies for budget repair and a return to surplus need to have broad community support.

CEDA is urging a bipartisan approach on the economy to ensure measures undertaken by one political party won't be overturned by a change of government.

The report titled "Australia's economic future: an agenda for growth" outlines policy priorities across ten key areas including innovation, competition policy, education, workplace relations and climate change.

But Professor Martin - a former Labor speaker - said there was deep disappointment that significant tax reform on the GST and negative gearing had been put in the too hard basket.

"There's no doubt that a genuine debate around tax reform is still required," Professor Martin told AM.

"The business community believes it's still important  and this goes into the term of whoever wins government and the one after that.

"It is a critical juncture for Australia now and we need to see people put politics aside because we really are going to be left behind if we don't embrace these sort of agenda."

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