Standard & Poor’s has revised Australia’s AAA long-term credit rating outlook from stable to negative, due to growing fiscal vulnerabilities.  It's could be the first step towards a downgrade.

"The negative outlook on Australia reflects our view that prospects for improvements in budgetary performance have weakened following the recent election outcome," S&P said in a statement.  The credit agency is the first of the big three to ding Australia's credit rating, after all three issued warnings that more action was needed to close the Federal Government's budget deficit.

Australia is one of only 10 nations to hold a AAA credit rating with the three major credit agencies.  But S&P is losing confidence in the numbers within Treasurer Scott Morrison's budget and suggest the path to surplus cannot be dependant on overly optimistic assumptions of iron ore prices and inflation.