WA stripped of AAA rating on fiscal restraint concerns
The gloss has come off mining powerhouse Western Australia after its credit rating was cut to AA+ by ratings agency Standard & Poor's amid questions over the state government's fiscal restraint.
The ratings agency said the lowering of WA's long-term issuer credit rating from AAA reflected "limited political will" in enforcing its "fiscal action plan" issued as part of its budget for 2013-14.
"While the fiscal action plan improves the state's path, in our view there is likely to be slippage, reflecting our view of limited political will, as evidenced by the early revision of some budget revenue and expenditure measures," S&P said.
WA Premier Colin Barnett said he was disappointed his state had lost its AAA rating.
"Debt is high and is rising. Why? Because this state is growing," Mr Barnett said. "We're investing in hospitals, in schools, in improving our capital city, road projects, regional development and the like, and I don't apologise for that."
S&P credit analyst Claire Curtin said the state's short- and long-term outlooks were revised to stable from negative, as the government was expected to implement enough of its fiscal plan to ensure its cash operating balance remained positive.
S&P said the likelihood of an upgrade in the next two years was not expected. The short-term issuer credit rating remained at A-1+.
NSW, Victoria and the ACT hold AAA credit ratings.
Queensland lost its AAA rating in 2009, while South Australia, Tasmania and NT have Aa1 ratings. Australia is one of the few countries in the world to retain its AAA-rating despite the economic turmoil that shook the world during the financial crisis.
WA's 10-year semi-government bond yields were trading at 4.95 per cent late on Wednesday, rising from just under 4.9 per cent before the S&P statement. In comparison, NSW 10-year government bonds were at 4.74 per cent, while 10-year Commonwealth government securities were at 4.06 per cent.