Western Australia's pristine AAA credit rating remains intact, but global ratings agency S&P Global has warned that the state's massive infrastructure spending could 'take the gloss off' its top-tier financial standing.
Infrastructure splurge under scrutiny
In its assessment of the WA State Budget handed down on Thursday, S&P Global reaffirmed the state's AAA rating with a stable outlook. However, the agency cautioned that the government's ambitious infrastructure program, which includes major transport and energy projects, could strain the state's finances over the medium term.
S&P credit analyst Anthony Walker said the state's strong fiscal management and robust economy had supported the rating, but noted that 'the sheer scale of the infrastructure pipeline presents risks if costs blow out or revenues underperform.'
The WA government has committed to a record $36 billion infrastructure spend over the next four years, funded largely by mining royalties and GST revenue. While the state's net debt remains low compared to other states, S&P flagged that debt levels could rise if the economy slows or commodity prices fall.
Stable outlook but vigilance needed
The stable outlook reflects S&P's expectation that WA will maintain its fiscal discipline, but the agency warned that any significant deterioration in the state's budget position could trigger a downgrade. 'We would consider lowering the rating if the state's debt burden increases materially beyond our base-case projections, or if its liquidity position weakens,' Walker added.
Treasurer Rita Saffioti welcomed the reaffirmation of the AAA rating, describing it as a vote of confidence in the government's economic management. 'We are investing in the future of Western Australia while keeping our finances in top shape,' she said.
However, opposition treasury spokesman Neil Thomson said the government was 'gambling with the state's credit rating' by borrowing heavily for infrastructure. 'S&P's warning should be a wake-up call that we cannot take our AAA rating for granted,' he said.
The WA budget forecasts a surplus of $2.6 billion in 2025-26, underpinned by strong iron ore and lithium revenues. But S&P noted that the state's reliance on volatile commodity prices remains a key risk.
