Moody’s Investor Services has downgraded the credit rating of Western Australian Treasury Corporation – the borrowing authority of the Western Australia government – from Aa1 to Aa2. The outlook is stable.
Western Australia is a resource rich state that has been hit hard by huge falls in commodity prices that have seen state revenues cut dramatically. The government has been accused of spending the riches from the resources boom that never eventuated. The budget position has deteriorated to such an extent that resource revenues now only account for 14.8% of total revenue compared with 21.6% at its peak. The state’s debt burden was around 44% of revenue in 2008 and is now around 102% and forecast to widen further in 2015/2016 to 128%.
A stable outlook was assigned to the rating because of support provided by Australia’s institutional framework to states and territories and expectations that Western Australia’s policy response will strengthen if its fiscal performance deteriorates well beyond what is projected.