The Canberra Liberals will call on the ACT Labor-Greens government to include the credit rating as an accountability measure in future budgets, after S&P Global Ratings downgraded the ACT’s AAA credit rating, for the first time in two decades, to AA+. 

“This motion will provide businesses and consumers confidence in the ACT’s economy through additional scrutiny on this government’s ballooning costs on infrastructure projects which do not provide value for money.” Canberra Liberals leader Elizabeth Lee said.

Chief Minister Andrew Barr, who is also the Treasurer, emphasised the government’s responsible fiscal management during an unprecedented economic shock, and reiterated that Standard & Poors had reaffirmed the ACT’s economic fundamentals as very strong.

The most recent budget papers released before the credit rating downgrade showed that the ACT Government’s borrowings are forecast to grow to $17.4 billion by 2026-27, with interest costs of $614 million per year, just over $1.6 million a day.

Canberra Liberals Leader Elizabeth Lee said Mr Barr confirmed during annual reports hearings last week that interest rates on new borrowings will be higher due to the rating downgrade.

“The budget papers that Andrew Barr has provided in this term of government do not include any objective to maintain a triple-A credit rating,” Ms Lee said.

“This is in stark contrast to what was included in the budget a decade ago.

“Maintaining a triple-A credit rating ensures that the ACT Government can retain favourable borrowing costs and access to a broad investor base for government borrowings.

“This credit rating downgrade will increase interest rates on the billions of dollars that the government plans to borrow in the forward estimates.

“With this Labor-Greens’ government’s interest repayment bill costing Canberrans over $1 million per day, and growing, the downgrading of our credit rating will make it even more expensive for Andrew Barr to pay back his spiralling debt.

“Wasting hundreds of millions of Canberra taxpayers’ money on failed HR IT systems and dodgy procurements has clearly impacted on the state of the ACT budget, all under the watch of Andrew Barr.

ACT Government response

“Every State and Territory Government in Australia has faced a once-in-a-century economic shock, which demanded significant and essential fiscal support for local communities,” Mr Barr said. “This support has had flow-on implications for credit ratings across the Commonwealth.

“Like the other states and territories, the ACT Government supported households and businesses through the pandemic lockdowns and then invested in economic recovery. The cumulative cost to the Territory Budget of pandemic support measures reached around $660 million by 2023-24.  Beyond these pandemic specific costs, recent cost-of-living, housing, and public health support measures have also impacted the Budget.

“Despite these challenges, our economic resilience, with a strong jobs market and strong population growth, has meant the ACT is one of the fastest growing jurisdictions in Australia. And, as our population continues to grow, the Government is delivering the necessary infrastructure program to support that population growth.

“The expansion of the Canberra Hospital, a new northside hospital, new community health centres, building more housing, new schools and TAFE facilities, and public transport investment are all projects that will support population growth, and higher skill levels and incomes over the coming decades. 

“These are investments that must continue now and not be pushed back into the next decade. That is the choice the Government has made.

“The Canberra Liberals’ proposed accountability indicator makes clear that they would prioritise cutting infrastructure spending and cost-of-living support over providing necessary investments that respond to the economic circumstances of the day.

“Responsible fiscal management requires the ability to flexibly respond to economic conditions. Countercyclical public investment in the face of private investment and consumption dissipating through the pandemic saved thousands of jobs and businesses. Government’s must make choices as to their priorities, and with a strong economic outlook and stable revenue base, now is not the time to pursue senseless cuts to necessary public services.

“The ACT’s economic outlook remains positive, as confirmed by Standard & Poor’s, who said that: ‘Higher revenue from new tax initiatives, payroll tax receipts, and goods-and-services tax (GST) grants will contribute to modest operating surpluses from fiscal 2025. Our forecasts, such as GST, are more optimistic than those of ACT, which is conservative in budgeting, in our view.’”

“The Government’s choice is to invest now, with a clear longer term fiscal strategy to progressively improve the operating cash position and fully fund our superannuation liability. We know this supports intergenerational equity in our community.

“This fiscal strategy is underpinned by taxation reform providing a more stable revenue base compared to other jurisdictions. This approach has been supported by Standard & Poor’s assessment of the ACT’s credit rating:

“‘We view ACT’s financial management as a positive factor. The territory has a professional and independent public service, and prudent debt management. The institutional framework within which all Australian states and territories operate supports this. We consider this framework to be one of the strongest and most predictable for subnational governments globally. It promotes a robust management culture and high levels of financial disclosure and transparency.

‘This includes phasing out narrowly based transaction taxes, such as conveyancing duties, in favour of a broad-based land tax. These reforms may help to mitigate budgetary volatility.

‘The territory also has a credible plan to gradually eliminate its unfunded superannuation liability using ongoing appropriations and investment earnings in its superannuation provision account.’

“Standard & Poor’s have once again confirmed the ACT’s economic fundamentals remain very strong, underpinned by high gross state product (GSP) per capita, household consumption, and public demand.  Liquidity remains exceptional.  S&P have affirmed our ‘A-1+’ short-term rating. The outlook on the long-term rating is stable.”