Loan pain on the way

Aus­tralia to lose AAA rat­ing

Sunday Herald Sun - - News - SA­MAN­THA MAIDEN NA­TIONAL PO­LIT­I­CAL EDI­TOR sa­man­tha.maiden@news.com.au

TREA­SURER Scott Mor­ri­son’s midyear Bud­get up­date to­mor­row is set to seal the deal on Aus­tralia los­ing its AAA credit rat­ing, and could see home­own­ers pay­ing $720 a year more on mort­gages.

Rat­ing agen­cies will be closely watch­ing the pre-Christ­mas up­date, with econ­o­mists warn­ing that any loss of the AAA rat­ing could see an in­crease in in­ter­est rates of up to 20 ba­sis points.

Mr Mor­ri­son will be forced to wear the du­bi­ous hon­our of be­ing Aus­tralia’s first Trea­surer in three decades to pre­side over the loss of our AAA sta­tus.

But econ­o­mists say that in­ter­est rate in­creases will not hap­pen overnight, with Aus­tralia still re­garded as a safe har­bour for in­vest­ment.

“The ini­tial im­pact of that is a big fat noth­ing. But the of­ten quoted fig­ure of 20 ba­sis points is prob­a­bly broadly on the mark,’’ Deloitte’s Chris Richard­son said.

“In­vestors are des­per­ate for some­where safe to put their money. That doesn’t mean you shouldn’t fight to hang on to the AAA rat­ing.’’

Mr Richard­son put Aus­tralia’s chance of hang­ing on to the AAA credit agency rat­ing as “50-50’’.

Home­own­ers face an in­crease in re­pay­ments of $720 a year on an av­er­age mort­gage of $360,000, based on a 20ba­sis-point in­crease. But big bor­row­ers could face rises of $960 a year.

Many Mel­bourne house­holds are al­ready strug­gling to make mort­gage pay­ments. Berwick has the high­est num­ber of peo­ple fac­ing mort­gage stress, 3922, fol­lowed by Essendon, 3783 and Narre War­ren South, 3377.

Other sub­urbs suf­fer­ing the high­est lev­els of mort­gage stress in­cluded Sy­den­ham, Ep­ping, Highton, En­deav­our Hills and Tul­la­ma­rine.

In­creas­ingly pes­simistic about Aus­tralia’s chances of re­tain­ing the rat­ing, the Trea­surer has sought to blame La­bor for block­ing sav­ings mea­sures.

“The gov­ern­ment re­ceived a man­date to de­liver fur­ther fis­cal con­sol­i­da­tion,’’ Mr Mor­ri­son told the Sun­day Herald Sun. “We have al­ready cut the rate of spend­ing growth from 4.2 per cent, as it was un­der the former La­bor gov­ern­ment, to around 1½ per cent. By the end of the sit­ting weeks of par­lia­ment this year, we suc­cess­fully leg­is­lated over $21 bil­lion worth of Bud­get re­pair mea­sures over the for­ward es­ti­mates to 2019-20, and we in­tend to build on this.

“The big­gest op­po­nent for leg­is­lat­ing these Bud­get im­prove­ments is La­bor, who by their own ad­mis­sion would pre­fer the Bud­get deficit to be $16.5 bil­lion higher. You could be for­given for think­ing La­bor are al­ready sab­o­tag­ing the Bud­get, to un­der­mine Aus­tralia’s AAA credit rat­ing for their own po­lit­i­cal gain.”

La­bor leader Bill Shorten said that Mr Mor­ri­son’s at­tempts to sud­denly start blam­ing La­bor for the loss of the credit rat­ing were a joke.

“It’s time for Mal­colm Turn­bull and Scott Mor­ri­son to stop blam­ing ev­ery­one else and start tak­ing re­spon­si­bil­ity,’’ he said. “They’ve been in gov­ern­ment for nearly four years — and the Bud­get has got­ten worse ev­ery year.

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