The admission prompted independent economist Saul Eslake, the Grattan Institute's John Daley and Industry Super's Stephen Anthony to say Labor's decision had increased the risk that Australia's credit rating could be knocked down a notch by international ratings agencies. Shadow treasurer Chris Bowen and Opposition Leader Bill Shorten address the media after the Queensland Labor Business Breakfast in Brisbane on Wednesday. Credit:Alex Ellinghausen Such a move would potentially drive up borrowing costs for federal and state governments and hurt the economy. The trio also called on both sides of politics to exercise greater spending restraint and pursue more ambitious budget repair. The announcement that Labor would run bigger deficits in the next four years if it wins the July 2 election comes despite the federal opposition's recent warnings about Australia's credit ratings.

Labor's admission on bigger deficits came after Mr Bowen last month accused the federal government of risking the AAA rating after ratings agency Moodys issued a warning on the AAA rating in April and is a potentially a serious blow to the opposition's economic credibility in the eyes of voters. Mr Shorten with the Labor Party's election booklet. Credit:Alex Ellinghausen Mr Shorten said it was "true that Labor will not have the same degree of fiscal contraction as the Liberals over this period [the four year budget cycle]. This is because our solution to the structural deficit rejects unfairness, does not attack demand and confidence and avoids retrospectivity". And at the National Press Club, Labor finance spokesman Tony Burke effectively ruled out new spending cuts, if Labor is elected, and the budget is in worse than expected shape. John Daley of the Grattan Institute. Credit:Chris Pearce

That, in effect, means deficits could be handed down for a longer period than currently projected. "Why don't we believe that we need to go to additional spending cuts? ... We believe the structural changes that we've put forward would still be the answer because you don't want to attack demand, you do want to have a structural impact on the budget," he said. Economist Saul Eslake Credit:Christopher Pearce Potential risk Asked to assess this decision by Labor on Wednesday, Mr Eslake said that if Labor outlined only a small deterioration in its alternative budget bottom line that would not be a cause for concern.

But "given that Mr Bowen has expressed concern, rightly, that Australia is at risk of losing its AAA rating, it hardly seems sensible for a would-be Labor government to tolerate a significantly greater budget deficit over the next four years," he said. "If the difference is much bigger over the next four years, to some extent even if between years 5 to 10 they promise a bigger improvement, given the discount you must apply to long run forecasts, I would be worried about that." "Yes, they are potentially risking the AAA credit rating if they outline significantly bigger deficits." Labor has promised to release its costings earlier than Joe Hockey did in 2013, which was on the second last day of the election campaign. Mr Daley said that "yes, they have placed the AAA rating at risk" because ratings agencies would see that successive governments and oppositions of all persuasions were again delaying tough budget decisions.

"They [the agencies] are very nervous about a pattern of behaviour that puts off tough decisions again and again. And meanwhile the debt gets larger and larger," he said. "When debt was at 15 per cent of GDP no-one got excited, but as it heads towards 30 per cent people get nervous. I'd be surprised if it doesn't peak higher than the current estimated 37 per cent." "Whoever wins the election, the credit ratings agencies will be looking very closely at the four year outlook and beyond." Treasurer Scott Morrison said on Wednesday the opposition had "basically given up on the budget task".

"I can assure you the ratings agencies will be looking at their costings and their funding, if they were to be in government, over four years and how they plan to do that." Labor released a 32-page Ten-Year Plan booklet that contained no new policies and amounted to a summary of the opposition's promises to date, including proposed investments in TAFE, schools and renewable energy. Loading Follow James Massola on Facebook Follow us on Twitter