Rating agency noted a ‘weak policy response to the deteriorating financial and debt position’ as it moved state from AAA to AA1

This article is more than 6 years old

This article is more than 6 years old

Moody’s Investors Service has downgraded Western Australia’s credit rating, in yet another blow to the state’s budget woes.

Moody’s downgraded the rating from AAA to AA1, and changed the outlook from negative to stable.

The downgrade reflects the state’s ongoing deficit, the deterioration in its debt metrics and a growing risk the trend might continue for some time.

“The challenges related to narrowing the budget gaps include greater volatility in the state’s revenue base, reflecting its increasing reliance on royalty income, expenditure pressures related to the rapid expansion in the state’s economy and population, and a weak policy response to the deteriorating financial and debt position,” Moody’s said.

Moody’s said the state government’s decision not to slow the pace of expenditures without offsetting improved revenue trends could lead to downward pressure on the ratings.

The rating decision follows similar action by Standard and Poor’s, which cut WA’s credit rating from AAA+ in September last year to AA+.

An opposition spokesman, Ben Wyatt, said that under Colin Barnett’s government the state debt had gone from $3.6bn in 2008 to an expected $29bn in 2017-18.

Wyatt said the premier should step down because he was more focused on his infrastructure legacy than handing over a good set of books.

He said Moody’s had used the most brutal rhetoric to show it had no faith in the Barnett government’s budget strategy and debt management.

“There is a reality for Mr Barnett’s financial negligence and that is the next generations of West Australians are going to have to make do with either high taxes or fewer services,” Wyatt said.