Queensland’s credit rating in Australia cut to AA for first time in 17 years
In the Australian state of Queensland, S&P Global Ratings lowered the credit rating from AA+ to AA for the first time in 17 years. As ABC News Australia reports, the outlook for the state’s long-term rating remains stable.
S&P Global Ratings explained the decision by expected pressure on Queensland’s finances due to higher wages and weaker sentiment in the property market. The agency also pointed to the state’s historically large infrastructure program: it includes transport and energy projects, hospital upgrades and infrastructure for the 2032 Olympic and Paralympic Games, while the state has a cash operating deficit.
Cost of borrowing
Gene Tunny, director of the Brisbane-based company Adept Economics, said that the lower rating would ultimately mean higher borrowing costs for the government. In his view, additional debt-servicing costs could reduce funds available for healthcare and education or prompt the authorities to raise taxes and fees.
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According to the state’s budget forecast, Queensland’s total debt is expected to reach A$216.47 billion by 2029–2030, a 52% increase over the next four years. Interest payments on the debt in 2029–2030 are forecast at A$10.87 billion — more than the planned spending on infrastructure for the 2032 Games.
Response from authorities and economists
Queensland Treasurer David Janetzki called the downgrade inevitable and placed responsibility on the previous state government and the federal authorities. Federal Treasurer Jim Chalmers said Janetzki was “absolutely wrong” to blame Canberra for his own economic management.
Economist Saul Eslake believes responsibility should be shared. In his assessment, the previous Labor government sharply increased spending without a corresponding rise in revenue, while the current government has not yet taken measures to rectify the situation. S&P Global Ratings said it could raise the rating if there are sustained operating surpluses and narrower deficits, but allowed for a further downgrade if financial management deteriorates.
