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Queensland’s Olympic infrastructure pipeline and refusal to rein in public sector spending will trigger a credit rating downgrade and plunge the state further into debt.
Ratings agency S&P is expected to announce the downgrade from AA+ to AA as early as Friday, according to sources with knowledge of the move but not authorised to speak publicly, with the revelation triggering a blame game between federal Labor and the state’s LNP administration.
The Crisafulli government’s June budget forecast deficits in each of the three coming financial years, sending debt spiralling from more than $142 billion to almost $216.5 billion by mid-2030.
Queensland was expected to be paying $7.7 billion each year by 2030 just to cover the cost of the debt, but this will climb further after a credit downgrade will increase interest costs.
Federal Treasurer Jim Chalmers flagged the downgrade in parliament on Thursday, decrying the “sharp deterioration” to the state’s fiscal position under LNP’s watch, “despite warnings from S&P in October last year, and again in February this year”.
But Queensland Treasurer David Janetzki blamed the Albanese government’s “budget of broken promises”, with the property reforms resulting in lower house prices and triggering a downgrade in expected revenue from transfer duties.
Janetzki has also clashed with the federal government over the refusal to overhaul the GST carve-up, which he says means Queensland’s share of the distribution has shrunk.
“After a decade of fiscal vandalism under the former state Labor government which left Queensland on track for a credit rating downgrade, Queenslanders are now also paying the price for Jim Chalmers’ budget decisions,” the state treasurer said in a statement on Thursday afternoon.
“Jim Chalmers confirmed on the floor of parliament today what we have long been saying; that Canberra’s continued cost-shifting onto the states has had a material impact on state budgets.”
The downgrade from S&P to AA for Queensland will come as interest rates on federal and state government debt climbed recently due to volatility in global bond markets caused by the ongoing war in Iran and rising inflation.
AMP chief economist Shane Oliver said the pending downgrade was due to the state’s budgetary position failing to improve since the LNP came to office.
“There’s going to be a blow to tax revenue from falling stamp duty collections on the back of falling home prices and falling activity levels, and, at the same time, the backup in bond yields mean more spending pressure for the state government,” he told this masthead.
“The combination of increased pressure on spending and less revenue, [S&P] possibly will conclude, is leading to a weakening in the state finances at a time when they were already vulnerable.”
Oliver conceded the big spending agenda in Queensland was kicked off by the former Labor government’s bid to claw back support ahead of the 2024 state election.
But the Crisafulli government had refused to rein in costly policies, including blanket 50 cent transport fares. The state government is also hampered by an election promise to not introduce new taxes or cut significantly from the public sector.
“There hasn’t been a lot of action to correct the outlook just yet by the government, which could have headed off a move by the ratings agency,” Oliver said.
“The ratings agency might also be concluding: ‘we’re halfway through the election term, and if we haven’t seen measures to correct the outlook now, then we probably won’t in the next couple of years in the run-up to the next election’.”
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James Hall is the News Director at the Brisbane Times. He is the former Queensland correspondent at The Australian Financial Review and has reported for a range of mastheads across the country, specialising on political and finance reporting.Connect via X or email.From our partners
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