Credit rating loss puts spending under pressure
The Barnett Government has lost WA's rolled-gold AAA credit rating for the first time since the WA Inc era, a development that will usher in widespread cuts to spending and programs, privatisation of State-owned assets and the delay or axing of major infrastructure projects.
Ratings agency Standard & Poor's revealed yesterday that it would downgrade its assessment of the State's creditworthiness because it did not believe the Government had the "political will" to get its spending growth under control.
The decision triggered a political firestorm, with the Opposition declaring the Government had "thrown away" WA's fiscal reputation because of its "reckless spending" and pursuit of "pet projects".
Premier Colin Barnett was defiant, denying the downgrade was a reflection on his financial management and blaming WA's declining share of GST, rapid population growth and the Budget's increasing reliance on volatile mining revenues.
"I think you can probably say maybe we tried to do too much too quickly," he said. "I'll accept that. But I challenge people to say what shouldn't we be doing.
"Debt is high and rising. Why? Because this State is growing. We've invested in hospitals, in schools, in improving our capital city, road projects, regional development and the like - and I don't apologise for that.
"This is a transformational decade for WA." Under attack from Labor in Parliament, Mr Barnett promised "significant expenditure cuts right across Government - every area".
"Labor calls for fiscal responsibility. Well, get ready because there's going to be a fair dose of it.
"The most immediate and direct way of reducing debt is to sell something, or sell several things. There will be a program of asset sales and that will be introduced very quickly."
Pressed on what assets could be sold, Mr Barnett and Treasurer Troy Buswell nominated utilities and land but would not be drawn on specifics.
WA's net debt was $6.8 billion when the Barnett Government came to power in September 2008.
It was $18.5 billion at June 30 and is projected to grow to $21.9 billion by the end of this financial year and $28.4 billion by June 2017, with much of the Government's ambitious infrastructure program still to be paid far beyond then.
In announcing its decision to downgrade WA to AA+, S&P said the Government appeared to "lack the political will" to stick to its fiscal plan in a clear reference to a string of policy reversals announced since Mr Buswell's Budget on August 8.
They include plans to halve the household solar panel subsidy, a dilution of plans to charge school fees for children of 457 visa holders and another top-up for the education budget.
"The downgrade reflects our view that while the fiscal action plan announced in WA's Budget 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.
Treasury projects a small operating deficit for 2014-15 and S&P analyst Claire Curtin warned that the AA+ rating could be knocked lower unless the Government got the Budget back into the black. "The rating could be pressured if WA's consolidated cash operating balance looked likely to fall into deficit without a convincing plan to return to surplus," she said.
_The West Australian _believes that Moody's and Fitch Ratings will reconsider their positions on WA's debt over the rest of the year.
Moody's put its AAA rating of WA on negative watch just before Christmas, while Fitch has said there were serious problems with the WA Budget position.
