Business Council boss says Australian credit rating needs to remain near AAA
Newly-appointed Business Council of Australia president Grant King has warned that the Government's AAA credit rating is at risk if efforts to repair the budget fail. Mr King told the ABC's AM program that a ratings cut "just follows as a matter of logic", after Deloitte Access Economics forecast bigger-than-expected deficits over the next four years.
"If those budget deficits continue to expand then our credit rating will be at risk," Mr King said. "I think it is very important that Australia maintains a high credit rating. Whether it's AAA, it's certainly not much less than that. The latter part of that statement appears somewhat resigned to the growing likelihood of a downgrade, stepping away from the AAA being the be-all and end-all as far as ratings are concerned.
Mr King admitted it will not be easy to avoid a downgrade of some sort. "We are seeing indications that the deficit is deteriorating so it is going to be a challenge," he added. Mr King's warning of an imminent ratings cut comes after ratings agency Standard & Poor's reiterated that the Federal Government has six to 12 months to deliver on more budget savings and revenue measures to avoid a rating cut. Mr King underscored the importance of Australia maintaining the AAA sovereign rating to ensure it can deliver on services Australians have come to expect during the boom years.
"The government is like the community's insurer of last resort. We expect our governments to look after our community and our citizens if there's a disaster like cyclones in Queensland," Mr King said. "In order for the government to have that capacity to support the community it has to maintain a good credit rating to be able to fund whatever those circumstances are."
The former Origin Energy chief executive of sixteen years also expressed concern that US President-elect Donald Trump will torpedo the Trans-Pacific Partnership (TPP) by not participating.
Mr King said, despite the absence of the United States, Australia needs to find ways to encourage and improve global trade. "Australia in a global context is a relatively small economy. We don't have a large domestic economy, so trade is critical to Australia," Mr King said. "We have to be an outward looking country. We can't run inwards and look to our own economy." King admits BCA has ground to make up in lobbying for tax cuts.
Mr King's appointment as Business Council president comes after criticism about the business lobby's power and influence from former Future Fund chairman David Murray and Liberal Party powerbroker Michael Kroger.
Former BCA president Catherine Livingstone and current chief executive Jennifer Westacott have been described as "out of touch" and "missing in action". "Look I think there are many aspects of public debate out there that are making it more and more difficult for any organisation frankly to get its view across," Mr King said. "So, yes, it might be right to say it's become more difficult. My hope is that in the next couple of years we can get better and better at that." Mr King also defended the government's plans for corporate tax cuts of $48 billion over ten years, despite perceptions the money will go into shareholders' pockets rather than create new jobs.
"What the BCA's arguing for is a reduction in the rate of tax. Business would be happy to pay more tax in total but a lower rate is a key to doing that." The business push for company tax cuts comes after confirmation last week that wages are growing at the slowest pace on record.
ARTICLE CREDIT SOURCE: http://www.abc.net.au/news/2016-11-23/business-council-boss-says-australian-rating-needs-to-remain-ne/8049126