Standard & Poor's Ratings Services has affirmed its AAA/A-1+ credit rating for Western Australia, saying the government has demonstrated ongoing fiscale prudence in managing gains from the commodity boom.
Standard & Poor's Ratings Services has affirmed its AAA/A-1+ credit rating for Western Australia, saying the government has demonstrated ongoing fiscale prudence in managing gains from the commodity boom.
The full text of an S&P announcement is pasted below
Standard & Poor's Ratings Services today said it had affirmed its 'AAA/A-1+' ratings on the Australian state of Western Australia. The outlook is stable. The ratings on the state's central financing authority, Western Australian Treasury Corp. (WATC), which operates with the benefit of a state guarantee, have also been affirmed at 'AAA/A-1+'. The outlook on WATC is stable.
"The government has demonstrated ongoing fiscal prudence in managing the gains from the commodity boom," Standard & Poor's credit analyst Danielle Westwater said. "The state's forecast of healthy operating surpluses is a credit strength as it mitigates the risk of a potential downturn in the commodities market."
Western Australia expects to continue to use part of its strong operating surpluses to partially fund the state's capital program, further supporting its strong balance sheet. Only 25% of the state's A$16.7 billion direct spending on its capital program is expected to be debt funded over the four years to fiscal 2011. Including the state's public trading enterprises, net financial liabilities (net debt and unfunded superannuation) to operating revenue is expected to grow to about 60% in fiscal 2011 from about 47% in fiscal 2006 -- a level that is consistent with the 'AAA' rating on the state.
The government's operating expenditure forecasts appear optimistic given recent actual operating expenditure growth. However, the size of the forecast operating surpluses and the strength of the state's balance sheet provides headroom in the event that expenditure exceeds expectations. Furthermore, given the tight labor market and the size of all the Australian state capital programs to fiscal 2011, we expect that some of the forecast capital expenditure may be delayed due to capacity constraints, and debt may therefore not reach forecast levels.
"The state is well entrenched in the 'AAA' rating category," said Ms. Westwater. "Downward pressure may be placed on the rating if the government undertakes a much more aggressive and prolonged capital program, or if there is a sustained deterioration in state finances over a number of years, coupled with government inaction to rectify the problem."
