In lowering the ACT credit rating from AAA to AA+ last month, “deficits in the ACT will be larger and more prolonged than previous forecast”, a report issued by S&P Global Ratings, and obtained by the Canberra Liberals, states.
The report predicts that the ACT’s ratio of debt to operating revenue will reach 154 per cent in fiscal 2026, “far exceeding the ratio for all AAA rated peers internationally”; that the ACT’s total tax-supported debt, as a proportion of operating revenues, will peak at 163 per cent in 2023–2024, and fall slightly to 154 per cent in 2025–2026; and that the ratio has grown significantly, from 93 per cent at the end of 2019.
Elizabeth Lee, Canberra Liberals Leader and Shadow Treasurer, blamed what she called Chief Minister Andrew Barr’s “decade of economic mismanagement” for the loss of the ACT’s AAA credit rating.
“When Andrew Barr took the reigns as Treasurer in 2011, the ACT had $1.5 billion total borrowings and an annual interest bill of $80 million,” Ms Lee said. “By 2026, the Territory’s total borrowings will balloon to $17.4 billion with an annual interest bill of $614 million.
“Canberrans are already paying around $1 million a day in interest costs alone. By 2025, this will be $1.6 million a day, with the S&P report also alluding to the rise of interest costs over the coming years.
“The most concerning part is that for all the debt, the ACT under Andrew Barr has a failing health system, an education system that is not meeting the needs of our children, crumbling infrastructure, declining community safety, neglected suburb maintenance, and a housing crisis.”
Mr Barr confirmed that total interest expenses across the general government sector approached $1 million a day, but the government’s investment interest and dividend revenue were nearly double that (nearly $2 million a day).
“We have money invested that is delivering us a return,” Mr Barr said. “We get interest on money in the Territory bank account. We get interest and earnings on the billions of dollars that are invested in the superannuation provision account. We also get tens of millions of dollars a year from dividends of income from the government-owned enterprises.”
The totality of investment revenue ($160 million in the last fiscal year), interest revenue ($267 million), and $71 million in dividend and income tax equivalent income from government business enterprises “dwarfed” the interest payments, Mr Barr said.
“All government has debt, and pays interest. We borrow from the market. Every state government, every territory government, the Commonwealth government, we all carry some debt. Households carry debt: we have mortgages, we have car loans. What Elizabeth Lee is arguing is that we shouldn’t be investing in infrastructure, because that’s what the debt is financing.”
For instance, the three hospitals the ACT Government had built in the last decade were funded by debt.
Ms Lee fears that as bonds issued by the ACT reach maturity, Mr Barr will have to borrow at higher interest rates to repay them. In the current financial year alone, this amount is $690 million, and $1 billion the following financial year.
“This is the equivalent of racking up a credit card debt, then getting another credit card with a higher interest rate to pay it off,” Ms Lee said.
“For Canberrans, this means higher rates, land tax, car rego fees, levies, and other hidden charges from Andrew Barr, with the S&P report even highlighting higher revenue from new tax initiatives going forward.”
The report predicts that “the sharp rise in spending” will lead to a 2.4 per cent operating deficit in 2023–2024, and “higher revenue from new tax initiatives and payroll tax receipts”.
“Alongside this,” Ms Lee said, “Andrew Barr has been double dipping on taxes, increasing household rates on average by 8 per cent a year over the last decade while also bringing in record conveyance duty receipts, despite promising his tax reform agenda would be revenue neutral.
“What this report and downgrading of the ACT credit rating highlights more than anything is that despite the spin coming from the Chief Minister, Canberrans will continue to suffer due to Andrew Barr’s economic mismanagement.”
Mr Barr said that the ACT Government’s interest was comparable with other states and territories.
“It has been impacted by COVID, obviously. All governments borrowed heavily during the pandemic. Governments also had to borrow heavily during the global financial crisis in the period 2008 to 2011. We, like every other government in Australia and every other government in the world, has more debt now than we did before. But our debt has financed infrastructure.
“The choice for Canberra was: sure, we could have no debt, but we would have had no COVID support package, we would have built no infrastructure over the last 15 years. That’s the world Elizabeth Lee likes: no debt, no infrastructure, no role for government. Every other government has taken the alternate path, so we’re the same as every other state and territory.”
