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Loss of AAA rating inevitable: Hewson

AAP logoAAP 4/12/2016 Colin Brinsden, AAP Economics Correspondent

Former Liberal leader John Hewson has sent a stark warning to Treasurer Scott Morrison as he puts together his mid-year budget review.

"The fact we are going to lose the triple-A credit rating is a foregone conclusion, it's just a question of timing," Dr Hewson told Sky News on Sunday.

The professor of economics believes the government is just muddling through and is a long way off getting a deliverable path to surplus by the end of the decade.

"I don't see any realistic debate by either side ... to deliver that sort of outcome," he said.

Mr Morrison will hand down his mid-year economic and fiscal outlook on December 19.

A recent independent analysis anticipates the budget will have blown out by some $24 billion over the next four years, partly due to record low wages growth hitting tax revenues.

Liberal frontbencher Arthur Sinodinos said neither wages or corporate tax revenues have grown strongly since the economy reaped the benefits of the mining investment boom.

"What we've got to do on the one hand is continue to promote strong growth in the economy," Senator Sinodinos told ABC television.

That is why the government is pursuing a 10-year plan to cut company taxes, which will reduce the cost of doing business and lead to higher jobs growth, he said.

Former Labor frontbencher Craig Emerson says the problem both sides of politics have faced in recent years is how budget forecasts for the four-year estimates are put together.

The first two years are forecasts made by Treasury and the third and fourth years are technical assumptions.

"You can't get to surplus on assumptions and this is what has dogged both sides of politics all the way through from about 2012 onwards," Dr Emerson told Sky News.

Shadow treasurer Chris Bowen said the government is persisting with measures that will never get through the parliament - the so-called zombie measures - while ignoring structural changes like Labor's plan to reform negative gearing.

The government is adamant that altering negative gearing would be harmful to the economy, a view it took to the last election, but fellow Liberal and NSW state planning minister Rob Stokes says he now believes it's time for a review of the concession.

"The government just looks ridiculous," Mr Bowen told Sky News.

"They should adopt a sensible approach (for the next election) .. I don't hold out much hope, but they should."

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