The Turnbull government's decision to scrap the Medicare levy increase while committing to fully funding the National Disability Insurance Scheme "poses a challenge" for the forecast surplus in 2020/21, a global credit rating agency warns.
Fitch Ratings, while confirming Australia's triple-A credit rating on Thursday, says the projected surplus in mid-2021 is highly sensitive to economic outcomes.
It says the government's decision to scrap the 0.5 per cent increase in the Medicare levy set to begin in the 2019/20 financial year, while still committing to fully fund the National Disability Insurance Scheme, "poses a challenge toward achieving this objective".
"The budgetary impact of the newly proposed income tax cut measures remains to be seen as details will be released in the (2018/19) budget," it says.
"Political differences between the House and the Senate have limited the government's ability to push through significant budget-related legislation, and pose an additional downside risk."
Treasurer Scott Morrison will hand down the budget on Tuesday.
