Australia news LIVE: Dutton flags ‘significant announcement’ in budget reply speech after Treasurer announces $17 billion in surprise tax cuts

One of the world’s top ratings agencies says Tuesday’s budget has not affected Australia’s credit rating.

Moody’s this morning said while there were risks, particularly around the performance of state governments, the budget did not pose a risk to the federal government’s triple A credit rating.

“The federal government budget will have little near-term impact on Australia’s overall rating outlook, though risks from both the domestic and external front are on the horizon,” Moody’s VP senior credit officer Martin Petch said.

“While Australia’s federal fiscal outlook remains largely unchanged in terms of Commonwealth gross debt and deficits, which remain low compared to its peers, the pressures from weakness in state fiscal positions will remain an important challenge.

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“Broad, long-term spending pressures in terms of [defence], healthcare costs, and climate change persist, increasing the risk around medium-term fiscal consolidation.”

While Treasurer Jim Chalmers announced a small improvement in the budget bottom line, he did confirm at least 10 years of budget deficits. This year’s deficit is forecast to be $27.6 billion, increasing to $42.1 billion in 2025-26.

Gross government debt is forecast to surpass the $1 trillion mark in the coming year.

Moody’s said the largest immediate risks remained a possible trade war and Australia’s poor productivity performance.

“Improving Australia’s weak productivity performance remains critical for sustaining its current credit rating,” Petch said.