Rob Breumelhof
Active Member
WESTERN Australia has lost its AAA credit rating, with Standard & Poor's downgrading the once-boom state.
WA's long-term issuer credit rating is now AA+, but its short-term issuer credit rating of A-1+ has been affirmed.
Standard & Poor's said the lowering of the long-term rating reflected its view that while the state government's Fiscal Action Plan announced in the August budget "improves the state's path", there was "likely to be slippage, reflecting our view of limited political will".
That limited will had been shown by the early revision of some budget revenue and expenditure measures, the ratings agency said.
On Tuesday, the state government watered down a plan to charge $4000 per year for students of 457 visa holders, saying the budget-boosting measure would bring in less than half of the $120 million that it originally anticipated over four years.
It was the second backflip by the WA government since the August budget, following the reversal of plans to halve the tariff rate for households that feed in surplus solar power to the grid, which was projected to claw back $51 million.
At the same time, the Liberal-led government is spending big on capital works such as the Elizabeth Quay waterfront development and a high-tech football stadium next to James Packer's Crown Casino.
A day after the budget was delivered, Treasurer Troy Buswell conceded that the estimated $47.3 billion debt facing WA in 2022/23 - assuming the Fiscal Action Plan worked - was a nasty figure that jumped from almost $22 billion in 2013/14.
Treasury had estimated the state's debt in 2022/23 would have been $86.3 billion if the Fiscal Action Plan hadn't been implemented.
"WA's debt burden is now at the high end of the domestic peer group, and in our view is likely to continue rising," Standard & Poor's said.
It's estimated the loss of the hallowed AAA credit rating will cost the state government at least $21 million per year to access debt.
Premier Colin Barnett said he was disappointed to have lost the AAA rating.
"Debt is high and is rising. Why? Because this state is growing," he told reporters.
"We're investing in hospitals, in schools, in improving our capital city, road projects, regional development and the like, and I don't apologise for that.
"This is a transformational decade for Western Australia."
Standard & Poor's said it didn't anticipate potential to upgrade WA's credit rating in the next two years.
"It would likely require a greater commitment to fiscal improvement than we expect, which would allow WA to realise budgetary flexibility and improve budgetary performance."
Differentiating between WA's mounting debt and its ability to keep its balance sheet in surplus, the ratings agency upgraded the state's outlook to stable from negative.
"The stable outlook reflects our view that the government will implement enough of its Fiscal Action Plan to ensure its cash operating balance remains positive," credit analyst Claire Curtin said.
WA's long-term issuer credit rating is now AA+, but its short-term issuer credit rating of A-1+ has been affirmed.
Standard & Poor's said the lowering of the long-term rating reflected its view that while the state government's Fiscal Action Plan announced in the August budget "improves the state's path", there was "likely to be slippage, reflecting our view of limited political will".
That limited will had been shown by the early revision of some budget revenue and expenditure measures, the ratings agency said.
On Tuesday, the state government watered down a plan to charge $4000 per year for students of 457 visa holders, saying the budget-boosting measure would bring in less than half of the $120 million that it originally anticipated over four years.
It was the second backflip by the WA government since the August budget, following the reversal of plans to halve the tariff rate for households that feed in surplus solar power to the grid, which was projected to claw back $51 million.
At the same time, the Liberal-led government is spending big on capital works such as the Elizabeth Quay waterfront development and a high-tech football stadium next to James Packer's Crown Casino.
A day after the budget was delivered, Treasurer Troy Buswell conceded that the estimated $47.3 billion debt facing WA in 2022/23 - assuming the Fiscal Action Plan worked - was a nasty figure that jumped from almost $22 billion in 2013/14.
Treasury had estimated the state's debt in 2022/23 would have been $86.3 billion if the Fiscal Action Plan hadn't been implemented.
"WA's debt burden is now at the high end of the domestic peer group, and in our view is likely to continue rising," Standard & Poor's said.
It's estimated the loss of the hallowed AAA credit rating will cost the state government at least $21 million per year to access debt.
Premier Colin Barnett said he was disappointed to have lost the AAA rating.
"Debt is high and is rising. Why? Because this state is growing," he told reporters.
"We're investing in hospitals, in schools, in improving our capital city, road projects, regional development and the like, and I don't apologise for that.
"This is a transformational decade for Western Australia."
Standard & Poor's said it didn't anticipate potential to upgrade WA's credit rating in the next two years.
"It would likely require a greater commitment to fiscal improvement than we expect, which would allow WA to realise budgetary flexibility and improve budgetary performance."
Differentiating between WA's mounting debt and its ability to keep its balance sheet in surplus, the ratings agency upgraded the state's outlook to stable from negative.
"The stable outlook reflects our view that the government will implement enough of its Fiscal Action Plan to ensure its cash operating balance remains positive," credit analyst Claire Curtin said.
