Victoria keeps its AA credit rating despite warnings over project costs
S&P Global said on Wednesday that it had reaffirmed Victoria's AA rating as it expected the state's infrastructure spending to peak this financial year and large deficits to narrow over the next two to three years.
S&P's outlook remained stable, meaning it believes the rating is more likely to stay at this position than to worsen.
'We expect Victoria to realise small operating surpluses over the next three years,' it said in a statement.
The ratings agency said the Allan government was taking steps to saves costs and would benefit from increased GST revenue and tax receipts. S&P also said the state would receive extra funding through its rebranded fire services levy and expanded congestion charge, which was 'supporting an improving operating position from a very weak base'.
'We expect the government to show fiscal restraint ahead of the 2026 election, which should keep its operating balance in surplus,' it said. 'Victoria's economy is wealthy, well-diversified, and fundamentally sound.'
Net debt in Victoria is forecast to hit $194 billion in four years' time.
S&P said Victoria's commitment to control costs and slow debt growth was important to rebuild the financial protections that had been lost during the COVID-19 pandemic. But it noted that doing this had previously been difficult for the government.
'The state tends to spend all unexpected revenue gains that it receives and has struggled to implement previous savings targets including workforce reductions,' the agency said. 'We believe strong governance and the quality of Victoria's major investment decisions are important for the government's fiscal credentials and our credit rating on the state.'
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