Credit watchers keep eagle eye on state budget debut

[Pelican Press 0]

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Credit watchers keep eagle eye on state budget debut

Credit assessors are breathing down the neck of Jaclyn Symes as she prepares to deliver her first state budget as treasurer.

After six months in the job, Ms Symes has been putting the finishing touches on the 2025/26 Victorian budget ahead of Tuesday’s grand reveal.

Her predecessor Tim Pallas didn’t leave much fiscal headroom and her task to balance the books could be made even harder depending on credit agency assessments of her debut budget.

S&P Global Ratings downgraded Victoria’s credit rating two notches in 2020 from AAA to AA, the lowest of any *********** state or territory.

Fellow ratings agency Moody’s followed suit, stripping the state of its AAA status in February 2021 and downgrading it from AA1 to AA2 in 2022.

Rating downgrades make it more expensive for governments to service debt, leaving less money to spend on critical services and infrastructure such as hospitals, roads and schools.

All three international agencies that rate Victoria – S&P, Moody’s and Fitch – currently class its

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as stable.

S&P analyst Rebecca Hrvatin said Victoria’s budgetary performance was trending up but forecast its “hefty” infrastructure program would cost $23.5 billion a year.

She expects debt to continue to rise, albeit slower than in recent years, as the state’s budgetary performance is “still weak”.

“What we will be looking for in the next budget is the state’s commitment to controlling operating costs and stabilising debt levels,” Ms Hrvatin said.

“Fiscal discipline will be key to maintaining the ratings and containing costs of the state’s large infrastructure program.”

Moody’s analyst Matthew Circosta was slightly more upbeat, expecting a recovery in local and nationwide economic growth on the back of easing inflation and monetary policy, despite the negative impact of US tariffs.

“Together with targeted spending measures, such as the continued re-profiling of capital expenditure, the improving economic backdrop will support Victoria’s operating performance and strengthen its capacity to service its growing debt burden over the next two years,” he told AAP.

Treasury’s latest forecast from December projected state net debt to hit $187.3 billion by mid-2028.

By that point, Victorians are predicted to be paying $25 million a day to service state borrowings.

A Moody’s report in February projected interest repayments would absorb almost nine per cent of Victoria’s revenue by 2028.

Ms Symes has ordered a review of the Victorian public service as the Allan Labor government eyes between 2000 to 3000 job cuts to rein in its soaring wages bill.

Mr Pallas sought to slash up to 4000 public-service jobs in the 2023/24 budget, but employee numbers actually grew slightly over the financial year.

Victorian Premier Jacinta Allan, who on Saturday touted a planned expansion of free public transport for seniors on weekends, said the budget would support frontline services including schools, hospitals and police.

“Following the responsible decisions we know we need to make, (we will) have every dollar invested in those frontline services,” she said.

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