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<\/p>\nQueensland’s credit rating has been downgraded for the first time in 17 years, adding pressure on the state’s budget as Brisbane prepares to host the Olympics in less than six years.\u00a0<\/p>\n
On Friday, S&P Global Ratings downgraded the state’s rating to AA, noting higher wages and a softer property market sentiment would likely “weigh on” Queensland over the next few years.<\/p>\n
Queensland Treasurer David Janetzki, who has warned of such a result since coming to office in 2024, described it as “an inevitability for a very long time”.\u00a0<\/p>\n
He pointed the blame at the former state government and his federal counterpart.\u00a0<\/p>\n
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Queensland Treasurer David Janetzki and Premier David Crisafulli. (ABC News: Michael Lloyd)<\/p>\n
However, federal treasurer and self-proclaimed proud Queenslander, Jim Chalmers, said it was “absolutely wrong” for Mr Janetzki to blame Canberra for his “own economic mismanagement”.<\/p>\n
The downgrade is the talk among economic and political circles, but let’s take a look at what impact, if any, it will have on everyday Queenslanders.<\/p>\n
Australian economist Saul Eslake said all of this was “no surprise”.<\/p>\n
He said Queensland’s finances were not currently as bad as some other states in the country, but they were deteriorating “more rapidly”.<\/p>\n
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Saul Eslake says the Queensland government has not taken corrective action to avoid a downward trajectory in its finances. (ABC News: Kate Nickels)<\/p>\n
Mr Eslake said the blame for this should be shared.<\/p>\n
“I think the primary responsibility rests with the previous Labor government that presided over a rapid increase in spending, unparalleled by an equivalent increase in revenues during its last term,” he said.<\/p>\n
“The Crisafulli government inherited this situation but so far it has done nothing to correct it and at the margin, its decisions have made it worse.”What does it mean?\u00a0<\/p>\n
The credit rating is a measure of the state’s expected willingness and capacity to repay any debt on time.<\/p>\n
It’s determined by reviewing the state’s economic structure and prospects, financial performance, balance sheet position, liquidity and debt management strategy, and the government’s fiscal strategy.<\/p>\n
Queensland’s credit rating has been AA+ since February 2009, when it was downgraded one notch from S&P’s top rating of AAA.<\/p>\n
After Friday’s downgrade, it now sits at AA, with the outlook on the long-term rating stable.<\/p>\n
Western Australia is the only Australian state with a AAA rating. New South Wales and South Australia have an AA+.<\/p>\n
Queensland now joins Victoria, Tasmania and ACT, which all have an AA rating.<\/p>\n
Australia as a whole remains one of only nine countries with a AAA S&P Global credit rating.<\/p>\n
Gene Tunny, director of Brisbane-based Adept Economics, said the downgrade would ultimately mean higher borrowing costs for the government.\u00a0<\/p>\n
“Because the better the credit rating, the better deal you get from the bond market that lends the money to the government,” he said.\u00a0<\/p>\n
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Gene Tunny says the downgraded credit rating will mean higher borrowing costs for the government. (Supplied: Gene Tunny)<\/p>\n
The downgrade would therefore bring additional costs.<\/p>\n
“This interest bill that the government faces is growing rapidly, and this will add to it,” Mr Tunny said.<\/p>\n
In its reasoning for the decision, S&P said Queensland’s budgetary performance would “remain very weak” over the next two to three years compared to those with its former ranking.\u00a0<\/p>\n
“The state is embarking on a historically large infrastructure program on major transportation projects, energy projects, hospital upgrades, and infrastructure for the 2032 Olympics and Paralympic Games, while running cash operating deficits,” it said.<\/p>\n
The ratings agency noted this would result in large deficits.<\/p>\n
What is Queensland’s total debt?<\/p>\n
Queensland’s total debt is set to reach $216.47 billion by 2029\u201330 \u2014 an increase of 52 per cent over the next four years.<\/p>\n
The state budget handed down in June forecasted the state would fork out $10.87 billion in interest in 2029\u201330.<\/p>\n
That is more than what the government plans to spend on infrastructure for the 2032 Olympic and Paralympic Games.<\/p>\n
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S&P Global says an uptick in infrastructure spending ahead of the 2032 Olympics will keep cash deficits high. (ABC News: Brian Hurst)<\/p>\n
The downgrade will have an impact on the everyday Queenslander, according to Mr Tunny, but he said it might “not be obvious”.\u00a0<\/p>\n
“How it shows up is because it means additional cost of borrowing,” he said.<\/p>\n
“That’s money that has to go to bondholders; it’s not money that you can use to fund health and education.\u00a0<\/p>\n
“This impacts the level of service delivery, or it could mean the government ultimately has to increase taxes and charges as that’s one way they could close this fiscal deficit.”\u00a0<\/p>\n
Mr Tunny said in 2009 the downgrade was “probably a bigger shock” whereas this time it had been “coming for quite a while”.<\/p>\n
Should Queenslanders care about the downgrade?<\/p>\n
Yes, but more so in the long term.<\/p>\n
When asked why an average person should care, University of Queensland economics professor John Quiggin said simply: “They shouldn’t.”<\/p>\n
He described the rating system as a “relic of the past”.<\/p>\n
“There was a time in the last century when people paid a lot of attention to these ratings; they took them very seriously,” he said.<\/p>\n
\u201cThat really fell through once the credit rating agencies gave AAA, the top rating, to a lot of very dubious securities that promptly collapsed.<\/p>\n
“It’s still a news item, but it certainly no longer has that kind of significance.”<\/p>\n
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John Quiggin says the rating system is a “relic of the past”. (ABC News: Curtis Rodda)<\/p>\n
Mr Eslake said the downgrade did not matter to the average taxpaying Queenslander in the short term.<\/p>\n
But he said in the longer term it would depend on whether the government took \u201ccorrective action\u201d hinted at by the ratings agencies.<\/p>\n
“Ultimately Queenslanders will find that more of the taxes that they’re paying \u2026 is going to meet interest on the state’s debt rather than paying for the services they expect a state government to provide.”<\/p>\n
Where to from here?\u00a0<\/p>\n
As mentioned, S&P Global said the economic outlook for Queensland remained stable, but it did provide an upside and a downside scenario for the next few years.<\/p>\n
On the upside, the credit agency said it could raise Queensland’s long-term rating if the state “runs sustained operating surpluses and narrower deficits” on a continued basis.<\/p>\n