Credit rating downgrade cost unknown for debt-hit state
Treasury boffins have not considered the fallout of another credit rating downgrade on paying down ballooning state debt.
As parliamentary hearings into the Victorian state budget got underway on Tuesday, Department of Treasury and Finance secretary Chris Barrett admitted the threat of a credit rating downgrade was not modelled.
The department has only assessed the budgetary impact of a 100 basis points rise in interest rates.
Credit 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.
Victoria's net debt is forecast to reach $194 billion by mid-2029, sending interest repayments soaring close to $29 million a day.
S&P Global Ratings downgraded Victoria's credit rating two notches in 2020 from AAA to AA, the lowest of any Australian 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.
Treasurer Jaclyn Symes is travelling to the US to meet with ratings agencies, including representatives from Moody's on Friday.
Moody's post-budget report said Victoria's economic outlook remains positive, with the improving economic backdrop expected to ease risks from high and rising debt.
But it warned Victoria wasn't completely out of the woods for a credit ratings downgrade.
"Global economic uncertainties and geopolitical tensions pose risks to the fiscal outlook," the report said.
"Should the risks materialise, or reform momentum weakens, or both, the potential for higher-than-expected debt and interest burdens would further weigh on Victoria's credit profile."
Ms Symes also defended the use of treasurer's advances for major project milestones and sparred with Nationals MP Jade Benham over the government's controversial emergency services levy.
All Victorian farmers will be spared from paying the increased tax on their land for 2025/26 after the entire state was declared drought-affected on Friday.
The one year reprieve, along with carve-outs for Country Fire Authority and State Emergency Service volunteers and life members, means the expanded levy is expected to raise $73 million less than expected.
But the treasurer remained adamant it won't compromise the Allan Labor government's funding commitments for emergency services.
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