Foreign debt grows by $28.1bn to $1.045tn, but Mathias Cormann says it is lower than if the government had not changed policies it inherited from Labor

This article is more than 3 years old

This article is more than 3 years old

Australia is being warned its foreign debt levels are “extreme” and savings need to be made to avoid a ratings downgrade.

The country’s net foreign debt grew by $28.1bn to $1.045tn over the June quarter, prompting the warning by ratings agency Standard & Poors.

“The government will point out that its fiscal position is strong – but it’s not quite as strong as it used to be,” John Chambers, chairman of the firm’s sovereign ratings committee, told the Australian.

The finance minister, Mathias Cormann, said debt is lower than what it would have been if the government had not changed policies it inherited from Labor three years ago.

Governments must heed IMF warning of $152tn global debt timebomb Read more

“We are working our way, still, dealing with the messes that they’ve created on the fiscal front,” he told ABC Radio.

Last week the International Monetary Fund urged governments around the world to take action to tackle a record $152tn debt mountain before it triggered a fresh global financial and economic crisis.

The IMF said it was vital to intervene early in order to mitigate the risks of a repeat of the damaging events that began with the collapse of the US sub-prime housing bubble almost a decade ago.

It said that new research in its half-yearly fiscal monitor covering 113 countries had shown that debt was currently 225% of global GDP, with the private sector responsible for two-thirds of the total.

The IMF said fiscal policy, the power governments have over tax and spending, could help. It suggested government-led programs to restructure debt and tax breaks to persuade creditors to lengthen repayment periods.