Credit where it's due for our economy

To hear the leaders talk you would think Labor and the Coalition were miles apart. One created a "budget emergency", the other a "$70 billion black hole". But the credit rating agencies don't believe a word of it.

To hear the leaders talk you would think Labor and the Coalition were miles apart. One created a "budget emergency", the other a "$70 billion black hole". But the credit rating agencies don't believe a word of it.

Standard & Poor's said on Monday it expected the new government to pursue a "broadly similar" strategy to the old one.

"After six years in opposition, the centre-right Liberal-National Party Coalition won the right to form government. We expect the new government to pursue a broadly similar fiscal strategy to the previous government, targeting narrowing budget deficits over time," it said in a statement.

"In line with the Coalition's pre-election announcements, we expect new spending measures - such as infrastructure projects and a new paid parental leave scheme - to be broadly offset by savings measures, particularly cuts to the bureaucracy and unwinding of recent policies related to household payments."

Moody's Investors Service expected no change to Australia's budget framework.

"Moody's AAA rating of the Australian government is based on the long-standing fiscal policy framework that results in balanced budgets or surpluses and low government debt in relation to other highly rated sovereigns," it said. "We believe that the return to power of a Coalition government will not result in changes to the framework."

Fitch Ratings thought the Coalition would "remain on track" to deliver a modest budget surplus in 2017, "broadly in line with the road map set by the outgoing Labor government".

"This reflects the absence of deep ideological divides between the two main parties on core aspects of fiscal management, notwithstanding political differences on a few taxation policies," it said.

"Fiscal discipline is enshrined in the Charter of Budget Honesty Act, enacted in 1998. This has forged a durable social consensus on maintaining a balanced budget through the economic cycle."

All three reconfirmed their AAA credit ratings for Australia.

Standard & Poor's said Australia's budget policies had been "conservative", leading to "declining budget deficits and general government debt remaining low". Moody's said the current string of "modest deficits" stemmed from the global financial crisis. Economic growth would remain "somewhat subdued" during 2013, picking up in 2014.

Fitch said growth had begun to slow in the wake of a "topping out" of mining investment. Sustaining GDP growth at its potential rate of 3 per cent could prove "challenging".

Peter Martin is economics correspondent.

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