S&P Global Ratings, which has had a AAA rating on Australia since February 2003, noted a small forecast surplus for this financial year, and a “dramatic turnaround” from massive deficits the nation was staring down at the height of the COVID-19 pandemic.

Australia was pivoting from combating inflation to helping to support growth and its industrial base.

“This change in fiscal stance could add slightly to inflation and public debt,” the rating agency said.

Strong commodity price windfalls were “papering over fiscal cracks” and the budget was tilted to “a more expansionary footing”, it found.

“While the Labor administration estimates that it has banked (rather than recycled into new outlays) approximately 88 per cent of unexpected tax revenue upgrades since coming into office, (the) budget slightly loosens the purse strings,” S&P said.

Moody’s Ratings said it was still unclear how the budget measures would affect inflation.

“Mechanical impacts on measures of the inflation rate may be moderately offset by additional spending in the context of a still tight labour market, delaying the budget’s forecast relatively fast decline in inflation,” it said.

“Looking ahead, the question is if fiscal consolidation will be sustained as structural spending pressures from the National Disability Insurance Scheme, interest payments on debt, and aged care and health spending continue to build,” Moody’s Ratings added.

“More broadly, the key issue facing Australia remains its weak productivity performance and how effective spending programs such as Future Made in Australia are in allocating resources and boosting productivity growth.”