S&P credit rating downgrade report highlights larger and more prolonged deficits for the ACT

A report issued by S&P Global Ratings in lowering the ACT credit rating from AAA to AA+ has highlighted that ‘deficits in the ACT will be larger and more prolonged than previous forecasts’.

The report, obtained by the Canberra Liberals also ‘forecasts the territory’s ratio of debt to operating revenue will reach 154 per cent in fiscal 2026, far exceeding the ratio for all AAA rated peers internationally’.

S&P also stated that the ‘ACT’s total tax-supported debt, as a proportion of operating revenues, will peak at 163% in fiscal 2024, and fall slightly to 154% in fiscal 2026. The ratio has grown significantly, up from 93% at the end of 2019’.

Canberra Liberals Leader and Shadow Treasurer Elizabeth Lee said Andrew Barr’s decade of economic mismanagement has resulted in the loss of the Territory’s AAA credit rating.

“When Andrew Barr took the reigns as Treasurer in 2011, the ACT had $1.5 billion total borrowings and an annual interest bill of $80 million. By 2026, the Territory’s total borrowings will balloon to $17.4 billion with an annual interest bill of $614 million,” Ms Lee said.

“Canberrans are already paying around $1 million a day in interest costs alone, by 2025 this will be $1.6 million a day with the S&P report also alluding to the rise of interest costs over the coming years.

“The most concerning part is that for all the debt, the ACT under Andrew Barr has a failing health system, an education system that is not meeting the needs of our children with crumbling infrastructure, declining community safety, neglected suburb maintenance and a housing crisis.”

Ms Lee also raised concerns that as bonds issued by the ACT reach maturity, Andrew Barr will have to borrow at higher interest rates to repay them. In the current financial year alone this amount is $690 million, and $1 billion the following financial year.

“This is the equivalent of racking up a credit card debt, then getting another credit card with a higher interest rate to pay it off,” Ms Lee said.

“For Canberrans this means higher rates, land tax, car rego fees, levies and other hidden charges from Andrew Barr with the S&P report even highlighting higher revenue from new tax initiatives going forward.”

The report states that ‘we expect the sharp rise in spending to lead to a 2.4% operating deficit in fiscal 2024’ and there will be ‘higher revenue from new tax initiatives and payroll tax receipts’.

“Alongside this, Andrew Barr has been double dipping on taxes, increasing household rates on average by 8 per cent a year over the last decade while also bringing in record conveyance duty receipts, despite promising his tax reform agenda would be revenue neutral.

“What this report and downgrading of the ACT credit rating highlights more than anything is that despite the spin coming from the Chief Minister, Canberrans will continue to suffer due to Andrew Barr’s economic mismanagement,” Ms Lee concluded.