<?xml version="1.0" encoding="ISO-8859-1"?> <docID>337596</docID> <postdate>2025-02-04 15:12:40</postdate> <headline>States warned to tighten spending or pay more to borrow</headline> <body><p><img class="size-full wp-image-335789" src="https://citynews.com.au/wp-content/uploads/2024/12/20220714001679192792-original-resized.jpg" alt="" width="900" height="600" /></p> <caption>Infrastructure... S&P said a booming population had driven record infrastructure spending from $64 billion in 2020, to a forecast of more than $100 billion in 2025 and 2026. (Jono Searle/AAP PHOTOS)</caption> <p><span class="kicker-line">By <strong>Alex Mitchell</strong> in Sydney</span></p> <p><strong>Australian states have copped a blast for being too loose with spending, in a warning signalling taxpayers might soon be forking out more to cover the costs of burgeoning debt.</strong></p> <p>S&P Global, one of the big three credit ratings agencies, warned states could face credit downgrades unless they cut costs while questioning if their governments had "strong financial management on a global scale".</p> <p>Three jurisdictions – NSW, Victoria and the ACT – have had their S&P credit ratings downgraded from those in place before the COVID-19 pandemic.</p> <p>NSW, the ACT and Tasmania also have "negative" outlooks on their current ratings, while only WA has seen its rating improved, from a AA+ to the top-line AAA level, since the virus hit.</p> <p>A weaker credit rating can lead to increased borrowing costs, pushing up the interest bill for already stretched state budgets.</p> <p>The ratings downgrades and negative outlooks come despite above-forecast revenues in recent years, causing S&P to lash state governments for loosening the purse strings.</p> <p>"The issue for Australian governments is spending, not revenue… their approach to fiscal discipline appears increasingly loose," agency analysts wrote.</p> <p>"We now question whether many states have exceptionally strong financial management on a global scale… if these conditions worsen or fiscal discipline weakens, credit quality may decline."</p> <p>Between 2020 and 2023, states received nearly $150 billion more revenue than predicted before the pandemic.</p> <p>That was largely driven by a commodity boom, with WA and Queensland dragging in $95 billion of the extra revenue between them.</p> <p>But over the same period, state operating expenses were $212 billion larger than budgeted, $66 billion more than they collected in additional revenues.</p> <p>S&P said a booming population had driven record infrastructure spending from $64 billion in 2020, to a forecast of more than $100 billion in 2025 and 2026.</p> <p>Project blowouts, attributed in some part to poor budgeting by states, had been matched with no appetite to reassess projects and scrap them if they no longer made fiscal sense.</p> <p>"States insist they are making 'difficult decisions' or 'hard choices' … at the same time, spending continues to rise rapidly, and new projects are regularly announced," S&P wrote.</p> <p>"Some states have relied on out-of-date costings to justify the perceived net benefits… cost blowouts that highlight poor budgeting and governance practices could affect our view of financial management."</p> <p>Victoria has easily the highest borrowings per person of the major states, with net debt due to hit $188 billion by 2028.</p> <p>NSW is second among the larger jurisdictions, while WA is the only state forecasting a per-person decline in borrowing over the next three years.</p> </body>