Queensland has successfully avoided a credit rating downgrade, but challenges remain as ratings agency S&P Global has affirmed its negative outlook for the state. The agency cautioned that Queensland’s “very weak” budgetary condition is likely to lead to an increase in debt, which currently stands at an alarming trajectory.
Maintaining the AA+ rating with a negative outlook represents a political win for Treasurer David Janetzki. A downgrade could have resulted in higher interest rates on debt repayments, further straining the state’s financial resources. Since assuming office nearly a year ago, Janetzki has engaged with financial agencies in an effort to stabilize Queensland’s fiscal standing, particularly following a state election characterized by substantial spending pledges from various political factions.
While the retention of the current rating is positive news, the outlook remains bleak. According to S&P’s director of government ratings, Anthony Walker, the agency indicated that Queensland’s fiscal outcomes are significantly weaker compared to its peers. In a report released on Friday, Walker noted that the state is expected to incur modest operating deficits along with larger deficits after capital accounts over the next two years. This trend is projected to continue until a recovery is anticipated by fiscal 2028.
In its June budget, the Queensland government projected total debt to escalate to $205.7 billion over the four-year outlook period ending in 2028-29. Despite these alarming figures, Janetzki has asserted that his government’s financial outlook will pave the way for a return to surplus. He has consistently emphasized this point in public statements, suggesting that the state can stabilize its finances despite the current challenges.
The looming deficits highlighted in the budget forecast raise critical questions about the government’s ability to manage its financial commitments effectively. Nonetheless, the prospect of returning to surplus by 2028 may have influenced S&P’s decision to maintain the current rating, as the agency acknowledged the potential for improvement in the state’s financial health.
As Queensland navigates these fiscal challenges, the focus will remain on how the government plans to control rising debt while maintaining essential services and programs. The next steps will be closely monitored by both financial agencies and the public, as the state seeks to balance its budgetary goals with the demands of its constituents.
