ACT Treasurer Chris Steel is committed to the infrastructure pipeline. Photo: Nicholas Ward.
The ACT has retained its AA+ credit rating, but global ratings agency S&P Global Ratings has flagged continued high spending is an ongoing problem despite Treasurer Chris Steel’s fiscal repair strategy.
In its latest assessment, issued after the budget posted a record deficit, borrowings and net debt, S&P Global Ratings said the ACT was unlikely to return to cash operating surpluses for some time.
On Tuesday (24 June), Mr Steel announced a slew of new taxes, lifted existing charges and slapped a $250 health levy on property owners to address falling revenue, as well as putting a brake on public service growth.
But overall spending will continue to increase over the forward estimates to meet service and infrastructure demands.
S&P Global Ratings said rising operating costs, particularly on health services, and higher spending on infrastructure could push debt above previous expectations and further erode justification for its AA+/Negative/A-1+ rating on the ACT.
S&P Global Ratings said the negative outlook reflected its view that fiscal controls were loosening, as indicated by the Territory’s cash operating deficits in four of the last five years.
“The Territory’s revised forecasts, outlined in [Tuesday’s] annual budget, point to an eight per cent cash operating deficit at a total Territory level for fiscal 2025 (ending 30 June, 2025),” it stated.
“We view this as an unusually weak performance relative to most highly rated peers.”
S&P Global Ratings expected the ACT to deliver narrow operating surpluses from fiscal 2027.
But the agency said an uptick in the Territory’s capacity to deliver infrastructure could also weigh on its deficits after capital accounts.
“This would delay its plans to improve fiscal performance and rein in rapidly rising debt,” S&P Global Ratings said.
The ACT is expected to deliver $1.55 billion in capital investment for fiscal 2025, or 14 per cent higher than budgeted a year before.
Mr Steel said the ACT Government was not prepared to cut its infrastructure program, which was vital to continued investment and jobs.
S&P Global Ratings said the Territory’s resilient and wealthy economy underpinned the AA+ rating.
“Furthermore, the excellent institutional framework that governs Australian states and territories supports credit quality and ensures liquidity coverage remains comprehensive,” it said.
In 2023, S&P Global Ratings downgraded the ACT’s rating for the first time in more than 20 years – from AAA (the highest rating) to AA+ – as it anticipated a slower fiscal recovery from the COVID-19 pandemic and higher spending.
Last September, S&P Global Ratings revised the ACT’s outlook to negative.
