Western Australia credit rating upgraded to AAA for the first time in nine years

A global rating agency has restored Western Australia’s AAA rating, noting that the state continues to outperform domestic and international competitors.

It is the first time in nine years that WA has received the highest rating.

In a report released today, S&P Global said the upgrade was the result of WA’s “track record of robust financial management, a very high-income economy and exceptional liquidity.”

Today’s upgrade follows status reporting a $5.7 billion surplus in this year’s budget†

The S&P report said the improved rating also reflected WA’s budget, which outperformed domestic and global competitors, and the state’s GST deal.

“A strong economic restart in Western Australia since mid-2020 has led to broad revenue growth, including transfer rights and payroll taxes,” the report said.

Tight ceilings on wages in the public sector also played a role, although it was noted that there was pressure to raise wages†

Infrastructure pipeline helped boost rating

The report also welcomed the government’s plans to spend $33.9 billion on infrastructure over the next four years, including the Metronet project.

That was despite the expectation that the government would not be able to spend all that money, given the pressure on the construction sector.

The possible sale of state bet TAB was also positive in the eyes of analysts.

According to the report, WA’s rating would likely be downgraded only if the state “underperformed significantly” on forecasts.

“This could happen if economic conditions deteriorate, for example due to a deep downturn in trading partners or heightened geopolitical tensions, causing the government to diverge significantly from its current prudent fiscal strategy,” it said.

“Substantial easing of operating cost constraints could also lead us to reassess our view of state financial management.”

WA was stripped of its AAA rating in 2013 amid declining revenues and a sovereign debt eruption†

At the time, it led to then-Prime Minister Colin Barnett taking drastic measures to bring the budget under control, including privatizing state-owned companies.

Financial reputation is ‘restored’: Prime Minister

In a statement, Prime Minister and Treasurer Mark McGowan targeted the record held by the previous Liberal National government.

“WA’s financial reputation has been restored after five years of hard work to restore public finances,” he said.

“Restoring our AAA rating allows my government to provide stability to Western Australians and fund important projects for the state’s future.

“It will also reduce the interest paid by the state on its future loans and emphasize that Western Australia is a safe investment destination.”

Speaking on behalf of Mr McGowan, Acting Prime Minister Sue Ellery said the upgrade gave the government more options when it came to finances.

“It will reduce the amount we have to pay in interest payments on debt going forward,” she said.

“That means we can make decisions in the future that we might not have made otherwise.”

Ms Ellery said the higher credit rating would be a factor the government would consider when considering whether it could provide more support for the cost of living, or a larger pay increase to the public sector.

It leaves WA the only state with a AAA rating from S&P, with Queensland, New South Wales, South Australia and Tasmania all one step lower at AA+. Victoria is again slightly lower at AA.