State deficit puts credit rating at risk

29/01/2009 - 09:21

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Treasurer Troy Buswell has flagged further cuts in government spending as ratings agency Moody's warns the state's AAA credit rating will be at risk should the budget slide into deficit.

State deficit puts credit rating at risk

Treasurer Troy Buswell has flagged further cuts in government spending as ratings agency Moody's warns the state's AAA credit rating will be at risk should the budget slide into deficit.

Mr Buswell reiterated that the government's current 3 per cent efficiency was "not optional" and was "just the starting point in the need to find savings".

The comments follow a warning by Moody's which said it will be on the lookout for the government's commitment to contain growing expenditure pressures for services and infrastructure expansion in order to alleviate a widening in deficits.

The government is currently reviewing its capital works program, with several engineering and architectural firms told to halt work on some WA projects.

 

The announcement is below:

 

The ratings agency Moody's has today warned Western Australians that the State Government's AAA credit rating will be at risk if the Budget's slide into deficit is not reversed.

Treasurer Troy Buswell said losing the rating would have a significant impact on business confidence in WA and increase the Government 's borrowing costs.

"Moody's correctly identifies the considerable challenge confronting us to rein in the galloping rate of growth in government spending," he said. "It is a challenge we cannot afford to ignore, and nor will we."

While the report confirms WA's current AAA rating, Moody's warns:
'Of key importance to the (ratings) outlook will be the Government's commitment to successfully contain growing expenditure pressures for services and infrastructure expansion in order to mitigate a widening in deficits.'

The State Government wholeheartedly agree with Moody's," Mr Buswell said. "The Budget we inherited from Labor had expenditure growing at more than 10 per cent a year and plans for an overly ambitious capital works program."

"Now that revenue growth has hit the wall, we have no choice but to reduce the rate of general outlays and reassess the capital works plan."

The Treasurer said that contrary to the view apparently held by many in the public sector, the three per cent efficiency dividend was not optional. It was just the starting point in the need to find savings.

"While it gives me no pleasure to be reconsidering capital works during an economic downturn, the reality is that if your income is declining, your spending has to fall with it," he said.

Mr Buswell said he was holding a series of meetings with fellow Ministers in order that informed and timely decisions could be made about revised capital works priorities.

Transferring the 'Works' function out of the Department of Housing and Works and into the Department of Treasury and Finance had provided improved linkages with infrastructure planning and budgeting and better overall control of the capital works program.

"We do not want a repeat of the Perth Arena debacle, for example, which Labor put together on the back of an envelope as a political fix, and which has now tripled in cost to more than $450million," he said.

"We will simply not rush capital works projects for political reasons."

The Treasurer said a comprehensive audit of the public sector set up by the new Government was reviewing public service levels, structure and functions. Its first task was to identify options to help reform spending in the lead up to the 2009 10 Budget.

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