Does Australia face the threat of a credit downgrade or not? Is the government’s current level of spending responsible or not? The answers to those questions should be clear, but after last night’s speech by Treasury Secretary John Fraser, they are anything but.
“Australia is one of only 10 countries with a triple A credit rating from all three of the major rating agencies, reflecting our reputation for fiscal prudence. But this rating is dependent on credible fiscal consolidation and a smooth transition to a more diverse economy. We should not be complacent about this.”
So is Australia in danger of losing its triple A credit rating from three agencies, the coveted achievement of former treasurer Wayne Swan? Not so, according to the Prime Minister, who claimed this morning that Fraser’s speech had been “written up sensationally” in the media, and pointed to recent affirmations of Australia’s rating by agencies.
Despite the cover of a claim of sensationalism, it appears the Treasury Secretary is at odds with his Prime Minister.
What about our current level of spending? It’s at 25.9% of GDP, Fraser said, and should be more like 25% of GDP (the last time spending was below 25% for an extended period was from 2010-13; as a proportion of GDP, spending has gone up under the Coalition compared to the Labor years). True, Treasurer Scott Morrison has repeatedly said the government has a spending problem but did little in last year’s Mid Year Economic and Fiscal Outlook other than offset additional post-budget spending by Tony Abbott and Joe Hockey that had blown spending out over 26%.
It’s hard to avoid the impression that, as rumours circulate that Fraser won’t last long in his job, he’s decided a little independence from the government isn’t going to hurt. But at a difficult point in the nation’s fiscal fortunes, appearance of disunity between Treasury and the Prime Minister isn’t helpful.