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Credit ratings agency Moody’s has called on the State Government to exercise spending restraint amid an election campaign characterised by big-spending promises.

Moody’s annual report on WA, released today, says WA has retained its AAA credit rating due to “ample budget flexibility supported by a robust resource-based economy”.

However, WA remains on a “negative” ratings outlook, refecting Moody’s opinion that the credit rating could be downgraded, and will remain so until the government “resolve(s) to narrow the deficit and slow the pace of debt accumulation”.

While the Barnett Government has delivered operating surpluses, it’s huge infrastructure program has seen debt balloon from $3.6 billion to $15 billion and it continues to accumulate cash deficits.

“Improvements in Western Australia's fiscal performance will be challenged by increasing revenue volatility, particularly due to this state's greater reliance on iron ore royalties,” Moody’s said.

“In addition, Western Australia's budget outcomes remain challenged by cost pressures related to rising demand for services, such as health and education, as well as the infrastructure needs of a rapidly growing population and burgeoning resource sector.”

Moody’s praised the Government for implementing measures to slow spending growth, including the efficiency dividends and the freeze on filling public service vacancies.

“But achieving projected annual average expenditure growth of 3.8 per cent - as compared to the 9.9 per cent over the last four years - will prove challenging and will likely require greater expenditure control,” Moody’s said.

The report comes as both sides of politics commit to big new capital and operating expenditure promises in the election campaign.

So far only Labor has begun to outline savings measures; including a pledge by Mark McGowan to defer a new museum, axe the Roe 8 extension, and move the major football stadium from Burswood to East Perth in a bid to help pay for the $3.8 billion Metronet public transport plan.

The Liberals are yet to explain how they propose to fund their own $3.7 billion public transport plan of the MAX light rail and an rail spur to Perth airport.