Shadow Treasurer Curtis Pitt says the downgrade to Queensland’s credit rating is the responsibility of the LNP government – as warned by ratings agency Fitch in March.
“As Fitch Ratings noted in its last regular assessment, the latest ratings downgrade is all the LNP’s own work,” Mr Pitt said.
He said Fitch Ratings’ last regular assessment of the state issued on 26 March this year had stated:
“Queensland’s new government has pledged to address the challenges of budgetary recovery and debt growth. Its ability to do this successfully will be an important component of our assessment of the state’s rating, Fitch Ratings says.”
“In other words, Fitch warned that any of its ratings issues after March would be the responsibility of the LNP government,” Mr Pitt said.
“That means responsibility for the latest ratings downgrade rests squarely with the Newman Government and in particular Treasurer Tim Nicholls.
“It really is becoming rather sad to hear Mr Nicholls continually blaming the previous government for what Fitch has clearly said is his responsibility.”
He said the Treasurer needed to wake up and realise that he was no longer in Opposition.
“The fact is this week he delivered his first Budget and he needs to take responsibility for it.”
Mr Pitt said the Treasurer on ABC TV’s 7.30 Queensland on Tuesday night Mr Nicholls had agreed the 2012 State Budget drew “a line in the sand” and that the LNP would “take full responsibility for the decisions we’ve made in this Budget”.
“Quite simply, it is time Mr Nicholls lived up to his word,” Mr Pitt said.
Mr Pitt said in March Fitch had also commented on the state’s fiscal position and said:
“The outgoing [Labor] administration has taken initial steps to rectify the situation, reviewing the [capital expenditure] programme and using asset sale proceeds to cut borrowing. The most recent budget aims to lower debt despite recent natural disasters, including severe flooding and cyclones, and sluggish economic growth.”
“In other words, the previous government had taken steps to restore the Budget position,” Mr Pitt said.
“This is totally contrary to what Mr Nicholls has been repeatedly claiming.”
Following is the complete text of Fitch rating’s March 26 statement:
Fitch: Queensland Government Debt Challenge Remains Ratings Endorsement Policy
26 Mar 2012 7:08 AM (EDT)
Fitch Ratings-London-26 March 2012: Queensland’s new government has pledged to address the challenges of budgetary recovery and debt growth. Its ability to do this successfully will be an important component of our assessment of the state’s rating, Fitch Ratings says.
Worsening public finances after a period of rising debt and weakening budgetary performance saw us revise the Outlook on the State of Queensland’s ‘AA+’ rating to Negative from Stable last July, saying that a downgrade was likely if Queensland did not limit debt growth and recover sufficiently positive operating margins in the next 24 months.
The risk of further fiscal deterioration is already reflected in our Negative Outlook. The victory of the Liberal National Party in Saturday’s elections, after the Labor Party had held office continuously since 1998, does not therefore have ratings implications per se. We will continue to monitor Queensland’s financial situation and aim to discuss its policies with the new administration in the coming weeks, and to review the rating over the next few months.
Ahead of the election, the LNP said it aimed to return Queensland’s budget to surplus and pay down debt. It said its plans to control spending would help deliver a budget surplus by FY2014-15, and that it would ensure expense growth does not exceed revenue growth.
Queensland’s debt has increased considerably since 2007, mainly driven by a growth in capex to meet the physical and social infrastructure needs of a population that is both growing and ageing, and which is spread across a large geographical area. Meanwhile, operating expenditure has exceeded revenue growth. The ratio of direct debt to current revenue rose to 64.8% at the end of FY2010-11, from 46.3% a year earlier.
The outgoing administration has taken initial steps to rectify the situation, reviewing the capex programme and using asset sale proceeds to cut borrowing. The most recent budget aims to lower debt despite recent natural disasters, including severe flooding and cyclones, and sluggish economic growth.
The full impact of these measures remains to be seen. However, as long as Queensland suffers from a negative operating margin, the debt burden is likely to increase, weighing on the state’s credit profile.
In common with other Australian states, Queensland’s high investment grade rating reflects the strong support from the federal government. Australia was upgraded to ‘AAA’ in November last year.