Qld avoids credit rating downgrade. But state’s books ‘remain grim’

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Qld avoids credit rating downgrade. But state’s books ‘remain grim’

Queensland has avoided a dreaded credit downgrade but ratings agency S&P Global affirmed its negative outlook for the state, warning its “very weak” budgetary condition will result in a further surge in debt.

Retaining the AA+ negative outlook will be viewed as both a political and monetary win for Treasurer David Janetzki, given the higher interests imposed on debt repayments when saddled with poorer ratings.

Janetzki has regularly met with agencies since coming into office nearly a year ago, desperate to avoid a downgrade to serve as affirmation the LNP had stabilised the state’s fiscal position following a state election riddled with enormous spending pledges from both sides of politics.

Treasurer David Janetzki and Premier David Crisafulli with the budget papers in June.

Treasurer David Janetzki and Premier David Crisafulli with the budget papers in June.Credit: Jamila Filippone

But the update from the leading ratings group painted a grim picture for the state, after the government revealed in its June budget total debt would soar to $205.7 billion over the four-year outlook by 2028-29.

“Queensland’s fiscal outcomes are very weak compared with peers,” S&P’s director of government ratings, Anthony Walker, said in a note on Friday.

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“We expect the state to incur modest operating deficits and large deficits after capital accounts over the next two years, before recovering by fiscal 2028. As a result, debt will rise steadily.”

The June budget forecast deficits for each of the four years in the forward estimates but Janetzki repeatedly declared the new government’s outlook would put the state “on a path to surplus”.

This messaging may have resonated with the agency, who flagged a likely return to surplus in 2028 which contributed to the state staving off the downgrade.

“The government plans to curtail expense growth through measures such as limiting headcount from fiscal 2027, reducing consulting costs, and finding savings such as procurement efficiencies,” Walker said.

“Successfully implementing these will be crucial to maintaining our ‘AA+’ credit rating on the state.”

AMP chief economist Shane Oliver said he was surprised the state had avoided the downgrade but the continued negative outlook was a sign the government was “still on notice”.

“There’s no doubt the [fiscal] outlook remains grim,” he told this masthead.

Oliver was critical of the LNP government’s refusal to curb spending, saying an expenditure reduction could have resulted in a credit rating upgrade rather than a stabilisation.

“In the first year or two of a new government, now is the time to get things in order,” the respected economist said.

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“If they had moved fast and got things in order, then it’s quite possible that the negative outlook might have been removed.”

Janetzki said the decision from S&P backs in the government’s first state budget which “laid the foundations” for fiscal repair.

“But the serious challenges we face will take time to overcome, this term of government and the next,” he said in a statement to this masthead.

Labor’s shadow treasurer Shannon Fentiman said the LNP’s fiscal policies were “putting Queensland’s credit rating at risk”.

“A ratings downgrade will cost Queensland millions in increased borrowing costs that could have been dedicated to cost of living relief, housing, hospitals, schools and roads,” she said in a statement to this masthead.

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