From the ABC:
Moody’s has yet to undertake a full analysis of the budget but it has already made it clear the Government has to do more to curb spending, and close the gap between declining revenue and expenditure.
“The fiscal deterioration reflects a significant slowing in economic growth, which is having a more pronounced drag on tax revenues than anticipated, and is also exacerbating falls in royalties that have occurred in line with lower iron ore and oil prices,” Moody’s said in a statement.
“Although the state has implemented measures to constrain spending, these efforts have not been sufficient to stem budgetary gaps which ultimately will lead to further increases in its debt burden.”
Moody’s noted the Government’s stagnant payroll tax revenues forecast to increase by just 0.2 per cent, the predicted 5.6 per cent slump in land tax and an 8 per cent drop in land tax, leading to a 3.1 per cent fall in total revenues.
“Meanwhile, expenditures are set to rise by 3.7 per cent as interest costs owed on the state’s now higher level of debt rise by 13.4 per cent and public sector salaries increase by 3.5 per cent, along with other costs, but only partially offset by a decline in capital expenditures,” Moody’s said.
Dr Nahan acknowledged the dramatic slump in revenue over the past two years had hit the Government hard.
“Revenue’s collapsed and I got to get on with managing the economy and the budget in these circumstances,” he said.
But Moody’s believes he needs to do more.
“The projected improvement in the state’s financial performance will rely to a large extent on a strengthening in the State Government’s resolve to lower current expenditures,” Moody’s said.
“Particularly as the growth in revenues is not expected to return to the more robust pace seen in earlier years, given slower economic growth as the economy transitions from a reliance on mining investment to production and related exports.”
Moody’s will now review the budget in detail before forming any view about the state’s credit rating.
“Moody’s will focus on the state’s ability to respond more forcefully to the less robust revenue environment and its capacity to slow the anticipated pace of debt accumulation,” it said.
And it will find more debt, more often for a longer period and downgrade again!
