07/07/2016 11:54 AM AEST | Updated 15/07/2016 12:56 PM AEST

S&P Downgrades Australia's Credit Outlook Amid Political Uncertainty

But we've retained our AAA Credit Rating.

David Gray / Reuters

Standard & Poor's has downgraded Australia's credit outlook from stable to negative amid political uncertainty.

The global economy rating group, however, maintained Australia's AAA credit rating.

The downgrade was announced five days after Australia's Federal Election which still remains too close to call.

In a statement,S&P said the new government would be on notice.

There is a one-in-three chance that we could lower the rating within the next two years if we believe that 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.

Treasurer Scott Morrison said Australia needed to do what was needed to maintain its AAA credit rating.

"The world is watching. The rating agencies are watching," Morrison said at a press conference.

"It means that we have to live within our means as a government."

Morrison also flagged the tension between budgeting and spending.

"We know we live in globally uncertain economic times and we know there are many pressures on the budgets and there are many demands on budgets and things that people would like to see but equally we have to balance the responsibility we have for fiscal strength," Morrison said.

"These two things have to be dealt with together not as competing forces."

Britain lost its AAA credit rating after the Brexit vote to leave the EU.