Wed. May 25th, 2022

Light rail

Infrastructure projects such as the next stage of the light rail may be subject to delays, says Standard and Poor’s. Photo: Fil.

The ACT government’s financial credentials have once again got their thumbs up with the international credit rating agency Standard and Poor’s (S&P), which confirms its AAA credit rating.

This is the second time this year that Standard & Poor’s has confirmed the government’s credit rating of “AAA / A-1 + ‘Ratings Affirmed; Outlook Negative”.

The ACT rating is the highest awarded by Standard & Poor’s, and the ACT remains the only Australian state or territory and the only subnational government in Asia Pacific with a AAA rating.

Chief Minister Andrew Barr said the decision by the credit rating agency acknowledged ACT’s strong economic management and recovery plans during one of the biggest economic shocks in the history of the national capital.

“In October, we released the 2021-22 budget, which outlines our economic plan. We provided much-needed support to our economy to protect jobs, support our most vulnerable, and invest in a pipeline of sustainable urban infrastructure,” he said.

“The ACT government is committed to our plan and supports the growth of our economy in the coming decade. We have an ambitious goal of 250,000 secure local jobs by 2025.”

The confirmed rating comes despite a deteriorating budget position, with the bottom line blowing out to nearly $ 1 billion in minus, but Standard & Poor’s said ACT’s very high vaccination rates were expected to help ACT’s operating balance return to profit relatively quickly.

“Our rating on the ACT reflects its excellent financial management; very high-income economy, which is dependent on the public sector and tends to perform better than most peers; and outstanding liquidity levels,” said Standard & Poor’s.

“The territory’s economy had grown sharply during the financial year 2021, leading to budgetary results significantly better than we had previously expected. Australia’s excellent institutional framework also supports the assessment.”

But the rating agency warns that delivering the government’s $ 5 billion infrastructure pipeline, including the light rail, Canberra Hospital Expansion and new schools, will be a challenge as governments across Australia strive to increase their own infrastructure programs and set limits on industry capacity and skilled migration.

“As such, our forecasts assume underdelivery over the next three years,” said Standard & Poor’s.

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It said the ACT had actually under-spent on construction work, relative to its budget, by 22 percent last fiscal year and 34 percent the year before.

Standard & Poor’s was optimistic about the ACT budget position, saying their own revenue and expenditure forecasts were more optimistic than the government’s.

The negative outlook reflects its perception that there is at least one in three chances that the ACT’s fiscal recovery will underperform its forecasts.

Standard and Poor’s does not mention the shadow on the horizon, the new Omicron COVID-19 variant, but it is too early to say what impact it may have.

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