Budget 2014: S&P Belies PM Tony Abbott’s Warning That Blocking by Labor of Budget Cuts Would Lead to Review of Australia’s AAA Rating

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By Vittorio Hernandez | May 21, 2014 7:39 AM EST

Another hole has been punched into the argument of the Coalition that the proposed 2014-15 budget would be for the long-term benefit of Australia. In insisting that the Opposition's vow to block in Parliament the spending cuts would be bad for the country, Prime Minister Tony Abbott even cited an alleged threat from rating agency Standard & Poor's that the nation's AAA credit rating could be subject to a review.

Mr Abbott based his warning on alleged comments by S&P sovereign analyst Craig Michaels that Canberra's valued credit rating is at risk of review if Parliament would fail to pass major budget cuts which the Australian Financial Review published.

But The Australian quoted on Tuesday Michaels that there is no immediate risk to the triple A credit rating.

"We have a stable outlook on the AAA rating, which means we think there's a less than one-in-three chance of a change to the next couple of years," Michaels said.

He added, "Our view hasn't changed from what we said a week ago ... that we were looking for the government to run its finances prudently and to gradually improve budget performance to see deficits decline over the medium term."

Mr Abbott had warned on Tuesday morning that losing the triple A rating would lead to higher rates of interest on the country's debt equivalent to $1 billion a month on the interest alone.

He insisted the budget is the Coalition's way of addressing the debt and deficit disaster allegedly left by the previous Labor government, stressing, "It is the only plan and until such time as Labor comes up with a plan of its own they are nothing but fiscal vandals."

But Labor leader Bill Shorten said that when its term ended in September, it left the federal government with triple A ratings not only from S&P but also from Moody's and Fitch. He countered, "If Tony Abbott squanders our AAA rating then it's on his head."

Also on Tuesday, Treasurer Joe Hockey charged the Opposition of blocking $40 billion worth of savings by planning to oppose parts of the budget, repeating the warning made by the PM earlier.

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The budget has proven to be Mr Abbott's Julia Gillard moment, causing his voter support to drastically plummet.

Aware of his unpopularity, the PM cancelled an appearance at Deakin University on Wednesday to attend the opening of a carbon fibre research facility in Geelong after learning of a planned student protest. The National Union of Students called for a day of protest due to the budget cuts and rising student fees.

In the past few days, two Liberals have been the target of student protest over the budget when they appeared at universities. Former MP Sophie Mirabella (https://www.youtube.com/watch?v=w75Zdkq0q68) had to be escorted by police out of Melbourne University on Monday due to protests, while Foreign Minister Julie Bishop (https://www.youtube.com/watch?v=IrgE51TRKFM) was mobbed by Sydney University students on Friday.

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