11 Jun 2019
The Territory continues to feel the impact of the brutal Federal Government $500 million annual GST cuts with credit rating agency Moody’s today saying it was the ‘main cause’ of the rating downgrade from Aa2 to Aa3.
The new rating will still see the Territory retain a Prime 1 investment grade, with Moody’s also changing the Territory’s outlook from ‘negative’ to ‘stable’.
Moody’s said the reason for downgrading the Territory to an Aa3 position is:
“The rating action reflects the Territory’s deteriorating stand-alone credit profile, as captured by its BCA, due to weakening revenue in the wake of slower economic growth and lower Goods and Services Tax (GST) receipts.
“The main cause of the weakening fiscal position is the cumulative effect of the lower GST grants from the Commonwealth Government of Australia (the Commonwealth, Aaa stable) as announced in the fiscal 2018, 2019 and 2020 budgets.”
The last credit downgrade for the Territory occurred in 2016 during the CLP’s final year in Government. Under the CLP, Moody’s said: “The ratings downgrade reflects the Territory's deteriorating financial performance” and that “Larger deficits, partially offset by asset sales proceeds, are in turn projected to drive up the Territory's debt burden”.
While Moody’s acknowledged the Territory Labor Government’s plan to fix the budget and return to surplus in 2027/28, the decision to downgrade is not a surprise considering the challenging economic times following the wind down of INPEX construction and the Federal Government GST cuts.
Treasurer Nicole Manison said to tackle those challenges, the Territory Labor Government commissioned an independent report, chaired by former WA Under-Treasurer John Langoulant, to deliver a clear plan to fix the Territory budget.
The plan (announced in April) will see the a reduction in Government expenditure through measures including freezing pay for politicians and public service executive, and a 10% reduction in executive positions.
Government will also cut red tape to attract private investment to create local jobs and grow our economy.
Government is also already implementing more immediate saving measures through the root and branch review into departments and programs.
QUOTES from Treasurer Nicole Manison:
“When we came to government we inherited an $876million deficit from the CLP and a declining economy as INPEX construction wound down.
“Then the Federal Government cut $500 million per annum from our GST.
“Today in their rating determination, Moody’s has again highlighted the devastating impact the Federal Government GST cuts have had on the Territory budget.
"Our plan to fix the budget is already underway and will see the budget return to surplus in 2027/28.
“The plan provides a sensible way forward for the Territory finances – that will continue to support Territorians by creating local jobs and growing the economy, and we will continue to invest in education, health, housing and community safety.
“This is in stark contrast to the CLP who cut front-line services and jacked up price prices by 30%.”
Media Contact – Hannah Farmer - 0428 497 154