Queensland Credit Rating Downgrade Looms, Blame Game Ensues

Queensland is teetering on the brink of a credit rating downgrade, a development that would exacerbate the state's burgeoning multi-billion-dollar debt and interest costs. This potential downgrade has sparked a heated blame game between Canberra and the LNP state government.

AMP chief economist Shane Oliver warned that a downgrade to Queensland's AA+ rating would lead to increased costs for maintaining its ballooning debt. "That means you've got less money left over to spend on other services or alternatively you've got to raise taxes or alternatively it just leads to a bigger budget deficit," he said.

"Neither of those outcomes are particularly attractive and that's where it impacts the average Queenslander because it could mean pressure for higher taxes or it could mean less in the way of government services. So there will be a cost to Queenslanders, unfortunately."

Political Finger Pointing

In federal parliament, Federal Treasurer Jim Chalmers described the risk of a downgrade as "very troubling". He expressed concern about the potential downgrade, stating, "As a Queenslander, I am concerned that despite substantial and increased Commonwealth support for Queensland, the Queensland government's fiscal position has experienced a sharp deterioration."

Queensland Treasurer David Janetzki, who has consistently indicated that a downgrade was likely since taking office in 2024, declined to comment on any movement in the rating. Instead, he shifted the blame for any potential downgrade to the previous Labor government and the impacts of the latest federal budget. "After a decade of fiscal vandalism under the former state Labor government which left Queensland on track for a credit rating downgrade, Queenslanders are now also paying the price for Jim Chalmers' budget decisions," Mr Janetzki said in a statement.

"Jim Chalmers confirmed on the floor of Parliament today what we have long been saying; that Canberra's continued cost-shifting onto the states has had a material impact on state budgets."

Mr Oliver suggested that both the state and federal governments share blame for the potential downgrade. "At a high level, it's a result of economic circumstances," he said. He noted that while the Queensland government has made efforts to achieve a "more sustainable" financial position, this is being threatened by a fall in stamp duty revenue due to a declining property market.

"The falling property market, rising bond yields, the GST carve up and not enough fiscal austerity at a state level all have a role to play in this likely downgrade," he said.

Debt Forecast

Total debt is forecast to exceed $216 billion by 2029-30, representing a 52 per cent increase over the next four years. In his most recent budget handed down in July, Mr Janetzki had anticipated returning the state's books to surplus by 2029-30. A credit rating downgrade would cast doubt on this forecast.

Interest expenses for the current financial year are expected to reach $6.83 billion, and nearly $11 billion by 2029-30. This significantly exceeds the entire funding allocation for infrastructure for the 2032 Olympic and Paralympic Games, which stands at $7.1 billion.

Credit agency S&P declined to comment on any announcement or decision.