Australia's credit rating has been revised to negative from stable by Standard & Poor's because the agency no longer believes in the Government's ability to lower debt.
The Australian dollar fell after the rating revision was announced.
"The negative outlook on Australia reflects our view that without the implementation of more forceful fiscal policy decisions, material government budget deficits may persist for several years with little improvement,'' S&P said in a note to markets.
"Ongoing budget deficits may become incompatible with Australia's high level of external indebtedness and therefore inconsistent with an AAA rating,'' it said.
Along with strong institutions, a credible monetary policy and floating exchange rate regime, Australia's public finances had traditionally been a credit strength for the sovereign rating.
Since the global financial recession of 2008-09 and, more recently, the end of the mining boom, Australia's fiscal position had continued to weaken under successive governments, delaying an eventual return to budget surpluses.
Given the outcome of the double-dissolution election which might result in neither of the traditional governing parties commanding a majority in either house, fiscal consolidation might be further postponed, S&P said.
The central Government's current projection date for a balanced budget in the year ending June 30, 2021, was now eight years later than the previous government's earlier projection of fiscal year 2013, which it made in 2009.
If achieved, it would come more than 10 years after the global recession initially pushed the central government budget into deficit.
The negative outlook on Australia reflected the view prospects for improvements in budgetary performance would be weaker after the recent election outcome, and general government sector deficits might remain material over the forecast period.
Government debt could continue to rise, unless more budget savings measures were legislated or there were improvements in the revenue outlook.
"There is a one-in-three chance we could lower the rating within the next two years if we believe Parliament is unlikely to legislate savings or revenue measures sufficient for the general government sector budget deficit to narrow materially and to be in a balanced position by the early 2020s.
"We will continue to monitor, over the next six to 12 months, the success or otherwise of the new government's ability to pass revenue and expenditure measures through both houses of Parliament.''
S&P could also lower the rating if Australia's external position weakened further.
That could come from current account deficits remaining at the higher end of the historical range; from a further weakening of the terms of trade; or from an increase in the banking sector's cost of external funding.
