Queensland's Credit Rating at Risk of Downgrade
Queensland's AA+ credit rating is at risk of being downgraded, according to Treasurer David Janetzki. This could lead to higher borrowing costs for state projects, including those related to the 2032 Brisbane Olympics.
The downgrade risk stems from the state's growing debt burden and structural deficits in the budget. S&P Global Ratings analyst Anthony Walker warned that additional spending could weaken Queensland's budget and increase debt beyond expectations, potentially leading to a downgrade.
Queensland's debt is projected to reach almost $172 billion by 2027-28, with interest repayments exceeding $7.7 billion. The state's credit rating has been AA+ since 2009, when it was downgraded from AAA.
The LNP government, which took office in October 2023, has been warned by S&P about the downgrade risk. Treasurer Janetzki has stated that the government is committed to addressing the issue and will continue to review the budget.
However, the increased costs of projects inherited from the previous Labor government are contributing to the heightened risk of a downgrade. Professor Robert Bianchi of Griffith University estimates that a downgrade could increase the interest rate on Queensland's debt by eight basis points, resulting in an additional $78 million in annual interest payments.
The potential consequences of a downgrade are significant. It could lead to higher borrowing costs for the state, impacting infrastructure projects and essential services. The government is facing the challenge of managing the state's finances responsibly while ensuring continued economic growth and development.