‘Labor’s legacy’: ratings agency downgrades state’s budget outlook

S&P has warned the newly Queensland LNP government to slash spending and cut debt, or risk the state’s first credit rating downgrade in more than 15 years.

Treasurer David Janetzki has blamed the former Labor government for Queensland’s credit rating outlook downgrade. Picture: Tertius Pickard

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Ratings agency S&P has warned the new Queensland LNP government to slash spending and cut debt or risk the state’s first credit rating downgrade in more than 15 years.

The agency on Wednesday revised the state’s outlook from AA+ stable to AA+ negative, prompting Treasurer David Janetzki to blame the near-decade of Labor rule in Queensland and conceding the move would add to the government’s cost of borrowing.

“The responsibility for this outlook downgrade lies solely with the former Labor government and their reckless management of the finances of the Queensland people,” Mr Janetzki told parliament.

“Labor’s fiscal vandalism was so bad that from here it will take a miracle to avoid a rating downgrade.”

S&P pointed to Mr Janetzki’s mid-year economic update, delivered in January, which predicted an extra $53bn in operational and capital spending over the next four years and a corresponding “rapid rise in debt” to pay for new expenditure.

Total government debt was forecast to hit $217.83bn by mid-2028, up $45.84bn on what Labor predicted in its final budget.

But the agency said there was “elevated uncertainty over Queensland’s fiscal outlook” because the new LNP government described the January update as the former Labor administration’s legacy and not its own fiscal strategy.

“It is unclear how the government will address spending pressures and how much lower expenditure and debt will be in the upcoming budget,” S&P said.

The agency warned the state budget would face “very strong” expenditure pressure, and said operating expenses would have risen about 50 per cent in the five years to mid-2025. “This reflects measures to address cost-of-living pressures, higher (public service) wages and headcount, pressures related to population growth, and natural disaster recovery,” S&P said.

“Containing operating expenses and achieving savings targets will be critical to maintaining the AA+ rating.”

Premier David Crisafulli won the October election promising not to cut public service jobs, after the Newman LNP government was tossed out of office after just one term following the sacking of 14,000 state-employed workers.

In Labor’s final budget in mid-last year, public service salary expenses hit $35.22bn for 266,999 full-time equivalent workers, up from $19.96bn for 209,999 FTEs in 2015-16, the first financial year of the Palaszczuk government.

The new government has already cancelled Labor’s Pioneer-Burdekin pumped hydro project, saving an estimated $37bn, and S&P hinted the LNP might scrap, defer or redraw other infrastructure plans.

But the LNP administration has locked in expensive cost-of-living measures such as making permanent Labor’s trial of 50c public transport fares, at an estimated cost of $1.5bn.

Labor’s Treasury spokeswoman Shannon Fentiman said S&P Global had “downgraded Queensland’s credit rating because David Janetzki juiced-up the mid-year budget update and failed to provide any fiscal strategy”.