Abbott's rate rise threat discredited by ratings agency

TREASURER Joe Hockey has appealed to Labor's "responsibility" to help pass the Abbott government's $38 billion of budget cuts, as it faces a wall of opposition to the promised savings.

Mr Hockey's attempted ultimatum came as Prime Minister Tony Abbott claimed the nation's Triple A credit rating was at risk if Labor did not come on board.

But Mr Abbott's claim, coming as the government finds few friends in the Senate willing to pass the cuts, was quickly discredited by ratings agency Standard and Poor's, which said the nation's economic outlook was "stable".

That statement has further eroded the government's claims of a "budget emergency", a key argument backing the cuts, which Labor leader Bill Shorten and key powerbroker Clive Palmer have both said, was a "confected" problem.

The budget cuts, which Mr Hockey on Tuesday said could only be passed by new legislation through parliament, included $3.5 billion for Medicare co-payments, $4.1 billion in fuel excise rises and $5 billion in higher education savings.

"In total - Labor's opposing $35.8 billion of initiatives that are going to repair the budget bottom line, plus the impact of course on the interest re-payment associated with that increase in the debt if those savings are not identified, which effectively means that it is around $40 billion," Mr Hockey said.

"It is not good enough to oppose the measures that we announced in the budget and to oppose the measures that we took to the last election and to oppose the savings measures he took to the last election.

"(Mr Shorten) actually has to provide an alternative. Otherwise things will start to fall apart, and why? Because there is a cost associated with not fixing the budget."

But Mr Hockey's statement has laid bare the government's dilemma over the cuts - with state governments opposing the budget's $80 billion in education and health cost-shifting, and a Senate unlikely to come to the party on other major savings.

Without these, the key savings in the Abbott government's first budget, the forecasts for returning the Commonwealth coffers to surplus in a decade will be worthless.

It also comes as key Coalition backbenchers speak out, many in private, that they were kept in the dark on the full extent of the cuts.

Queensland Senator Ian MacDonald publicly criticised the budget process, and the flack backbenchers are getting for the cuts, on the fact that the Coalition party room was not consulted.

Despite Mr Abbott on Tuesday saying he would not consider changes to the GST, Senator MacDonald said either broadening the tax to fresh produce, or increasing its rate, had to be part of the conversation on rectifying the budget.

Mr Shorten said on Tuesday if Australia lost the Triple A credit rating - a key achievement under the previous government - then it would be on Mr Abbott's head.

Topics:  budget 2014 interest rates joe hockey tony abbott

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