Queensland Premier questions ratings agency's credibility

AN international financial ratings service has punctured Queensland's seemingly sunny economic outlook, downgrading the state's prospects.

AN international financial ratings service has punctured Queensland's seemingly sunny economic outlook, downgrading the state's prospects to negative and questioning official forecasts that growth would surge from "zero to hero" after last summer's natural disasters.

The surprise assessment by Fitch Ratings, one of the big three ratings agencies in Australia, was immediately rejected by Premier Anna Bligh. She questioned the company's credibility, saying it had "more experience in the European economy than in the Australian economy".

Fitch is standing by its revision of the state's economic outlook from stable to "negative". Funding arm the Queensland Treasury Corporation received a similar downgrade, but Fitch affirmed the state's credit rating at AA+.

The director of Fitch's Sydney-based international public finance team, Andrea Jaehne, flagged more bad news for the Queensland economy, saying it was unlikely to achieve the stunning turnaround from flat growth forecast in June's state budget.

She said research to be released soon by the agency showed that state growth would be lower than the 5 per cent increase predicted for 2011-12, on the back of a 27 per cent surge in business investment, much of it in new coalmining and coal-seam gas projects.

Fitch said its assessment reflected Queensland's high operating cost base and the impact of "sluggish" economic recovery.

"We are saying that revenues are growing slower than operating expenditures and that does not give Queensland much capacity to absorb future external shocks," Ms Jaehne told The Australian.

Ms Bligh said Fitch had wrongly assumed Queensland was relying on reconstruction efforts to bounce back.

And she pointed out that rival ratings agencies Moody's and Standard & Poor's had backed Queensland Treasury forecasts that the state would "lead Australia in economic growth in this next 12 months and beyond".