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Agency puts Australia on notice amid concerns about household debt

Saying Australia’s record 28 year run without a recession would come to an end, Fitch noted one of the biggest risks remained the nation’s highly indebted households.

It said household debt, at 186.8 per cent of disposable income, was one of the highest levels among triple A rated countries while it posed “an economic and financial stability risk”.

“In the event that the current shock proves more persistent or leads to a structurally weaker labour market, households’ ability to service their debt could become impaired,” it said.

Of the world’s three major credit agencies, Moody’s has maintained its AAA rating for Australia with a stable outlook.

Treasurer Josh Frydenberg said the move by Fitch was a reminder of the importance of the government maintaining its commitment to medium term fiscal sustainability even as it spent billions to protect the country.

“Our measures are temporary, targeted and proportionate to the challenge we face and will ensure Australia bounces back stronger on the other side, without undermining the structural integrity of the budget which Australians have worked so hard to restore,” he said.

The Australian Office of Financial Management, which oversees the sale of federal debt, has revealed it plans to sell $130 billion worth of Treasury bonds this financial year. It has already sold $105 billion.

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Between $15 billion and $25 billion in Treasury notes, which are usually repaid within several months, are also likely to be sold. That’s on top of the $14 billion sold so far this month.

In December, following the government’s mid-year budget update, the agency had expected to sell $55 billion in bonds through 2019-20.

Once day-to-day management of older debts are taken into account, the figures suggest the federal budget deficit will be between $65 billion and $75 billion.

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