February 9, 2010 / 7:16 AM / 9 years ago

PM Rudd defends Australia from debt default barb

CANBERRA, Feb 9 (Reuters) - Australia’s government on Tuesday rejected election-year charges by the opposition that the country was close to default on national debt, charging its controversial finance spokesman with threatening its sovereign rating.

“Investors around the world don’t find these remarks amusing. They take them seriously,” a furious Prime Minister Kevin Rudd told parliament. “It is the height of risk to Australia’s global economic reputation.”

Rudd’s comments came after conservative opposition finance spokesman Barnaby Joyce told Australian radio “we’re going into hock to our eyeballs to people overseas”, referring to government debt raised last year to fund stimulus and dodge recession.

“You’ve got to ask the question: how far into debt do you want to go? We are getting to a point where we can’t repay it,” said Joyce, who has been criticised by his own opposition leader for wild statements threatening Australia’s AAA credit rating.

Rudd told parliament the comment — adding to earlier statements by Joyce criticising rising debt levels in the United States and at home in Australia’s states — was the “height of irresponsibility” in fragile world markets already in turmoil over government debt levels in Greece and southern Europe.

Australia’s sovereign debt, at 15.9 percent of GDP, is relatively small compared to levels of 20.2 percent in China, 83.9 percent in the United States and 81.8 percent in the European Union, according to the OECD.

Commonwealth Bank of Australia Senior Economist Michael Workman said Australia’s debt levels would not be questioned by markets, with a budget deficit likely to be cut by a quarter in the May budget as a result of economic recovery.

“People offshore tend to react negatively to Australia when they see comments like that,” Workman told Reuters.

“We are nowhere near the problem area of high budget deficits and a high debt. This seems to be part of the issue about trying to make debt a prime issue for the election,” he said.

Economic management and interest rates will be a major issue for voters in a nation where home ownership is seen as a right and mortgage levels can swing poll outcomes.

Rudd is expected to win a second term when he calls an election, probably late in 2010.

($1=1.156 Australian Dollars)

Editing by Sugita Katyal

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