Election Promises Could Jeopardise Australia’s AAA Rating, Credit Agency Warns

S&P cautioned that campaign pledges ahead of the May 3 elections could widen deficits and increase debt and interest expenses beyond projections.

People make their way in Sydney's central business district during the office lunch break in Australia on March 25, 2025. Saeed Khan/AFP via Getty Images

One of the world’s leading credit agencies, S&P Global Ratings, has put Australia’s major parties on notice, warning the country’s prized AAA credit rating could be at risk if election promises blow out structural budget deficits.

In a report released on April 28, S&P cautioned that campaign pledges ahead of the May 3 general election could widen deficits and increase debt and interest expenses beyond projections.

“The ‘AAA’ rating on Australia may be at risk if election promises result in larger, structural deficits, and debt and interest expenses rising more than we expect,” the report stated.

“The budget is already regressing to moderate deficits as public spending hits post-war highs, global trade tensions intensify, and growth slows.”

Both Labor and the Coalition have unveiled billions in new spending. Key promises include $1.8 billion (US$1.2 billion) to extend energy rebates, over $9 billion for Medicare, and $7.2 billion for Queensland’s Bruce Highway upgrades.

Further commitments were rolled out during their campaign launches earlier this month, focusing heavily on tackling housing affordability.

Chalmers Plays Down Risk to Top Credit Rating

Treasurer Jim Chalmers quickly reassured voters, saying Labor’s spending was responsibly managed.

Speaking at a press conference, he said the $10 billion in commitments made by Prime Minister Anthony Albanese’s government had been “more than offset” by improvements to the budget.

“If the ratings agencies are worried about spending and off-budget funds, we have demonstrated we have found the room for our election commitments,” Chalmers said.

Costings released by Labor showed the budget bottom line was $1 billion better over four years, with funding plans including $6.4 billion in savings through cuts to consultancy spending and an additional $760 million from increased student visa fees.

Finance Minister Katy Gallagher reinforced Labor’s commitment to protecting the AAA rating.

“I think we’ve been clearly shown today that the decisions we’ve taken show how much we respect the AAA credit rating,” Gallagher added.

Chalmers also used the moment to accuse Opposition Leader Peter Dutton of poor fiscal management.

“Peter Dutton proposed what poses an unacceptable risk to household budgets, to the national budget, to our economy, and also to our AAA credit rating as well,” Chalmers said.

“In uncertain times, in volatile times, we don’t need a volatile leader like Peter Dutton, who lashes out when he’s under pressure. We need to see the stability, the responsibility that only Anthony Albanese can provide, which I think is highlighted by the costings that we release today.”

Coalition to Save From Tax Cuts

Meanwhile, the Coalition made major spending pledges of its own.

Dutton promised a $21 billion increase in military funding if elected. He also committed a historic $9 billion investment into Medicare to “fix Labor’s healthcare crisis” and ensure timely, affordable access to doctors.

To pay for the additional defence spending, Dutton said a Coalition government would scrap Labor’s recurring expenses and the stage-three tax cuts, which he labelled fiscally irresponsible.

He has also pledged to cut 41,000 public service jobs in Canberra to save taxpayers’ money.

Reacting to the report, Shadow Treasurer Angus Taylor said the warning shows that “Australians are losing hope and they’re giving up” as a result of successive deficits and an expanding government.