WA credit rating again at risk
WA's credit rating could be downgraded because of the falling iron ore price and the State Government's failure to curb spending.
A decision could be made within weeks by either of the major ratings agencies to strip WA of its AA+ rating as the fall in iron ore threatens to punch a $5 billion hole in the State's finances.
Even a Federal Government one-off rescue package may not be enough to stop WA having the same credit rating as France or Kuwait. Two years ago, WA was rated AAA.
The steep fall in iron ore revenues, coupled with the continuing debate to get more GST, is hurting the State's longer-term plans to cut its overall debt level.
A credit rating downgrade would lead to a jump in the State's interest costs on its debt
Standard & Poor's analyst Anna Hughes said recent events warranted a close watch on WA.
"We're keeping a close eye on recent developments affecting WA's Budget position," she said.
"We need to weigh up not just changes in GST relativities but the impact of the recent steep fall in the iron ore price."
Although the Moody's ratings agency was unable to comment directly yesterday, it pointed to its most recent outlook on WA.
That outlook, which came after the company's decision to downgrade WA, warned the rating could be trimmed further if there was a lack of Government resolve to control spending or if debt levels climbed further.
A spokesman for Treasurer Mike Nahan said Treasury was in regular contact with ratings agencies, updating them on WA's economic and fiscal outlook.
Dr Nahan, who in December forecast this year's deficit would widen to $1.3 billion, is now facing even bigger red figures.
The 2015-16 Budget, which was forecast to show a $900 million deficit, is predicated on an iron ore price of $US77 a tonne. Overnight it was $US47.53.
Oil prices have fallen and WA's property market, a key source of Government revenue, is slowing faster than expected.
New Chinese figures show a sharp slowdown in WA's most important export market.
The value of imports by China from Australia, which is dominated by WA iron ore, has fallen to a two-year low.
While WA looks to other States to back a GST change that would deliver an extra $500 million, some States are increasing their criticisms of the Barnett Government.
Victorian Premier Daniel Andrews said WA's plea for more GST was a "bit rich", given the State's spending patterns in recent years. "They are spending like drunken sailors and they want Victorians to help them pay for it," he said.
