Achieving the targeted surplus of $7 billion this financial year is imperative for the government, which says spending it on stimulus will be a panicked move that can leave the economy exposed should the international situation worsen.

Mr Morrison used the S &P research to tell Parliament on Wednesday that fiscal discipline was an imperative.

"What our government is doing is investing in the economy ... from a position of fiscal and financial strength, and that has occurred from the careful and disciplined economic management from this government over the last six months. Its investment has been achieved without driving the budget into deficit."

S &P said it was comfortable with Australia's current economic situation.

"While economic growth has slowed to less than 2 per cent in fiscal 2019, we believe Australia's outlook is sound and forecast growth of about 2.4 per cent between 2020 and 2022.

"We expect growth to be supported by strong population growth, public expenditure, low unemployment, more policy certainty following the Commonwealth government election in May, and stabilising property prices in Sydney and Melbourne.

"Our expectation that the Australian government will maintain strong fiscal flexibility compared with its AAA peers is a critical factor in our assessment that Australia holds the highest possible rating on our scale," Mr Walker said.

He said S &P considered "strong fiscal outcomes to be important" for the AAA rating because of Australia's high level of external liabilities compared with its AAA-rated peers. This high level of external liabilities means the economy is more exposed to potential shifts in foreign investor sentiment.


The ratings agency also estimates that the general government budget, which includes the Commonwealth and sub-national governments, will achieve respective surpluses of 0.3 per cent and 0.6 per cent of GDP in fiscal years 2020 and 2021.

The Parliamentary Budget Office (PBO) also released its annual report National Fiscal Outlook: As at 2019–20 budgets on Wednesday, turning its attention to state fiscal discipline.

It noted that a change to the composition of national net debt was likely to see a significant increase in that held by state governments from around 10 per cent in 2018–19 to over 30 per cent state-held by 2022–23.

The PBO noted that infrastructure investment was projected to approach record levels across the country, reflecting substantial investment by NSW and Victoria.

Official construction figures out on Wednesday showed that construction work done fell less than expected in the September quarter, declining 0.4 per cent – much less than market expectations of a 1 per cent fall.

ANZ economists said the better-than-expected result painted a "slightly more positive picture for third-quarter GDP growth".

Private infrastructure, however, provided a downside surprise in the figures, declining by 4.6 percent.

S &P also noted in its report that if the economic situation worsened, then it would be concerned about the federal government's ability to lift spending on infrastructure to stimulate.

"We believe substantially increasing infrastructure spending in the near term would be difficult. This was evident in the government's recent announcement of a modest increase in its infrastructure spending of $1.7 billion over the next 18 months."