Australian PM urges divided Senate to tackle budget deficit

SYDNEY (Reuters) - Australian Prime Minister Malcolm Turnbull said on Saturday it was imperative for Australia to cut its high debt levels, urging newly elected opposition lawmakers to support his economic reform agenda when parliament resumes next week.

Turnbull is dependent on their support to rein in a budget deficit projected to reach A$37.1 billion, or 2.2 percent of gross domestic product in 2016/17 after a federal election two months ago returned his Liberal-National Coalition to power with just a razor-thin majority.

"We are at a critical juncture," Turnbull told the annual gathering of the Queensland state branch of his Liberal Party in Brisbane. "By acting together in the national interest we can improve the budget position, stimulate growth and create the industries that will produce the jobs of the future."

Australia is one of only about a dozen countries with a coveted triple-A credit rating from all three ratings agencies - Standard & Poor's, Fitch and Moody's - but they have warned it may be under threat if the country's budget deficit is not addressed.

A downgrade would be a political nightmare after successive governments brandished the rating as a badge of honor. It would also "be a blow to confidence" and could lead to a rash of downgrades for Australian banks and companies, the opposition Labor Party has warned.

The government in May pushed out a return to a budget surplus by a year - the red ink is projected to fade to $6.0 billion by 2019/20, with the aim of returning the books to balance by 2020/21.

To do that, the ruling Liberal-National coalition, which has a slim, one-seat majority in the lower house, will need either the Labor Party or 11 crossbench senators to push through its economic reforms in the upper house when parliament resumes on Aug. 30.

Turnbull urged opposition lawmakers to support the government's planned bill detailing some A$6 billion of savings.

"We have had constructive discussions with all the crossbenchers and we are confident that we can find common ground with them in order to achieve our objectives," he said. "Of course there will be negotiation and compromise."

(Editing by Jane Wardell and Simon Cameron-Moore)