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Category: Economic Trends

WA credit rating stable but risks ahead, agency warns

Wednesday, 26 Oct 2016 16:34:39 | Andrew O'Connor

Australian currency (ABC News: Nic MacBean)

A forecast sharp increase in GST revenue appears to have saved Western Australia from a further downgrade in its credit rating.

Ratings agency Standard and Poor's (S&P) has kept WA at AA+, but said the outlook for the state remained negative.

S&P downgraded WA from AAA to AA+ in September 2013.

The agency said budget deficits would continue until the state received increased GST revenue, and it would then return to small surpluses.

This year's state budget papers project GST revenue, which is distributed by the Commonwealth Grants Commission, to rise from $2.035 billion in 2016-17 to $6 billion in 2019-20

S&P said it believed the deficits, forecast to hit $3.9 billion this year, would be temporary.

It also considered the state's debt would remain "moderate," despite weaker revenues.

But the agency warned WA's budget deficits could "persist and increase its debt burden should the Government fail to further constrain spending growth ... or should its revenue fall even further."

It said the state still faced significant risks.

"Should there be further revenue or spending slippage, the state's cash operating deficits could be more long-lasting than we currently expect, and the state's tax-supported debt level could also increase to above 120 per cent of operating revenues, absent mitigating actions," the agency said.

"Meanwhile, we consider it could be challenging for the state to further achieve its cost savings targets."

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