Return to AAA credit rating a good outcome but based on key assumptions

The Shadow Treasurer Dr Steve Thomas has welcomed the return of Western Australia’s AAA credit rating from ratings agency Moody’s but highlighted that the assumptions and expectations raised in the report set a higher bar than currently predicted.

“Moody’s has lifted Western Australia’s rating up to AAA based on the ongoing strong revenue growth the Government has received, which is the result of the biggest fiscal boom this state has ever seen” Dr Thomas said.

“The boom is the direct result of high iron ore prices, which have remained at boom levels since February 2019.

“The floor in our GST revenue put in place by the previous federal Coalition Government has also underpinned our state’s performance.

“This boom has given the state record income and record surpluses, with $19 billion in surpluses in the last five years and a prediction of $30 billion in surpluses over a decade.

Western Australia now has Aaa ratings attributed by both major ratings agencies.

Dr Thomas said the key to the state’s future performance is the need to pay down debt, which was also identified in the Moody’s report.

“The report tells us that debt as a percentage of revenue is stable, but that relies on the high revenues of the current boom being maintained” Dr Thomas said.

“When the inevitable correction comes the percentages will change.

The report also pointed to Moody’s expectation that “the state will effectively use future windfall gains from high commodity prices to further diversify its revenue base, pay down debt or fund capital expenditure”.

“The Western Australia Government does not have an adequate  focus on diversifying our economy, and debt is forecast to rise over the next four years, not fall” Dr Thomas said.

“It is only focussed on spending on infrastructure as the outcome of its windfall gains, and this single focus at the expense of a more balanced fiscal approach is the threat that remains.”

“Debt has declined from the $32 billion Mark McGowan inherited in 2017 to $28 billion now, but it is forecast to rise to $36 billion by 2026-27. That is down $4 billion under Mark McGowan but then back up $8 billion under Roger Cook and Rita Saffioti.”