Australia’s largest bond investors are rushing to help fund state governments’ ambitious election promises as the threat of rating downgrades from budget blowouts pushes up borrowing costs.

Rating agency S&P warned last week that state governments faced lower credit ratings for failing to rein in pandemic-era spending to instead buy votes, rather than save money. That means that if the rating firms deem that state debt is now more risky, investors can charge more to lend money.