Queensland’s AA+ credit rating was first downgraded in 2009 and has remained at that level since.
Queensland’s 15-year AA+ credit rating may be under threat due to rising costs and increased government spending, according to S&P Global.
The credit rating assessed based on factors such as the state’s economic structure, financial performance, liquidity, debt management, and fiscal strategy.
Such a downgrade could result in higher borrowing costs for funding state projects, including preparations for the 2032 Brisbane Olympics.
This, in turn, flows down to taxpayers, who will see the government divert more funding into higher interest payments, rather than public services like hospitals and police.
S&P Global Ratings has warned that Queensland’s AA+ credit rating, which was downgraded since 2009 and never improved, could face a further downgrade if the state’s budget comes under further strain.
“Additional spending, whether from new policies or cost overruns, could weaken Queensland’s fiscal position and push debt levels beyond our forecasts,” said Anthony Walker, an analyst at S&P.
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“This could jeopardise the AA+ credit rating, especially if no corresponding savings or revenue increases are implemented.”
While the agency did not specify what the new rating might be, Queensland currently shares its AA+ status with South Australia, just behind Western Australia, which holds the top AAA rating.
New South Wales, Tasmania, and the Australian Capital Territory have an AA+/Negative rating, while Victoria is rated AA/Stable.
New Treasurer Warns of Credit Rating Risks
The warning comes after Queensland’s David Janetzki, the Liberal National Party (LNP) treasurer highlighted budgetary challenges stemming from the former government’s “reckless spending practices.”
According to Janetzki, Queensland’s debt is expected to hit nearly $172 billion (US$110.76 billion) by 2027-28, with interest repayments surpassing $7.7 billion. Queensland’s population number just over 5.5 million.
S&P also highlighted that total operating expenses for the 2024 financial year were nearly 40 percent higher than three years ago.
Janetzi said the government would continue to “calmly and methodically” review the budget.
“I said before the election I wanted to return a mature and calm discussion to what drives our prosperity and underpins our budget,” he said.
Janetzki also noted that the increased costs of projects inherited from the former nine-year Labor government were contributing to the elevated risk of a credit rating downgrade.
“It is now highly likely that Queensland will inherit an outlook downgrade, and ultimately a rating downgrade,” he said.
Meanwhile former Treasurer Cameron Dick said a credit downgrade would be “a tax on all Queenslanders,” as it would mean higher borrowing costs, resulting in “less infrastructure and fewer services.”
He tried to defend his government’s spending on ABC news, saying the state’s credit rating was deemed “stable” by S&P in September.
Queensland’s Budget Under Fire for Sweeteners and Rising Debt
In October, prior to the election, the Labor government faced scrutiny over pre-election budget sweeteners, which led to increased spending.
John Humphreys, chief economist for the Australian Taxpayers’ Alliance and a former Treasury official, criticised the measures as politically motivated to keep Labor in power.
He pointed to policies like $1,000 electricity handouts, $200 children’s sporting vouchers, a 20 percent discount on car registration, and 50 cent public transport fares.
“Most of the high-profile announcements in the budget are temporary,” Humphreys said.
He argued that Queensland’s rising debt is a result of unsustainable government spending.
Then-Treasurer Dick defended the budget, stating that cost-of-living relief was the priority, he acknowledged that the deficit was a deliberate choice to show support for Queenslanders.
“Delivering a deficit, spending more than the government collects in revenue, is not, and should never be an easy choice,” he said.
Meanwhile, ABS data released today highlights that excessive state spending across Australia has contributed to inflation.
AAP contributed to this article.
