Kevin Rudd claiming credit for my achievement, says Peter Costello

PETER Costello, the treasurer who restored Australia's AAA rating with Moody's and Standard & Poor's in 2003, says that if the budget deficit and debt "journey" continues as it has for the past five years, Australia will be at risk of being downgraded again. The former Coalition treasurer said yesterday Australia had lost its AAA credit rating under Paul Keating and it had taken a long time to restore.

Kevin Rudd has used Australia's AAA credit rating as a defence against criticism of the budget deficit blowout to $30 billion last Friday and the breaching of the $300bn debt level.

Announcing the September 7 election on Sunday, the Prime Minister deflected questions about the drastic reshaping of the May budget forecasts on rising debt, deficit and unemployment by asking: "If there is a debt and deficit crisis requiring an immediate return to surplus, why did the credit rating agencies provide us with an AAA credit rating?

"The real economic question facing Australia is this: how did we manage this economic transition coming from a radical adjustment to our terms of trade, which if we don't succeed in dealing with will affect jobs and also affect the standards of living of all Australians?"

Yesterday, Mr Costello said Mr Rudd was taking credit for what he did as treasurer in repaying debt, returning to surplus and regaining the top credit rating.

"Australia lost its AAA credit rating when it was downgraded twice back in the 1980s -- the days of the 'Banana Republic'. It took a considerable time to get that rating back again," Mr Costello said.

"When Kevin Rudd says Australia has a lower debt than Europe or America, it has nothing to do with him.

"He is not claiming credit for his record. He is attempting to claim credit for my record. The previous Coalition government paid off all debt.

"There was no net debt when he was elected. His starting point was incredibly strong. If he had inherited a position like President (Barack) Obama did or Prime Minister (David) Cameron did in the US and the UK, we would be where they are today.

"Since Labor was elected in 2007, the deterioration in the debt position has been very severe -- worse than the US and the UK. The journey has been terrible. What saved us was the starting point.

"If the journey continues in the way it has over the last five years, Australia will be at risk again."

In its last report on Australia's credit rating, Standard & Poor's said in mid-July that Australia's AAA rating was likely to remain stable on the assumption that the country's "historically conservative budgetary policies will remain in place".

The agency noted Australia's public finances had "worsened" in the past few years.