The Federal Government’s GST bailout and a tight rein on spending has helped improve WA’s credit rating amid signs the State economy is improving.

Agency S&P Global, which stripped the State of its AAA credit rating under the Barnett government, yesterday upgraded WA to stable from negative — a necessary first step to reclaiming the AAA rating.

The agency said the State’s Budget bottom line was improving, with the Government likely to run surpluses that in turn would reduce overall debt.

A combination of extra cash from Canberra under the new GST allocation, an increase in State taxes linked to a better economy and cuts in spending imposed by Treasurer Ben Wyatt combined to improve the credit standing.

“Western Australia’s fiscal position has improved during the past 12 months and we anticipate that this trend will be sustained across our forecast horizon,” S&P Global said.

“We expect that higher grants from the Commonwealth Government, solid growth in own-source revenues and tight control of recurrent expenses will see the State return to sustainable cash operating surpluses after several years in deficit.”

The GST package, which will be examined by a Senate committee today, will pump $4.7 billion in extra cash into WA over the next eight years.

Almost $2 billion, promised by the Government and Labor, will hit State coffers by 2021.

S&P Global said it was a major improvement for the WA Budget. But the agency also said the State Government’s “focus on restraining growth in operating expenses” was also rapidly improving the Budget bottom line.

It said the Government’s cuts to the public service, the cap on bureaucrats’ pay rises and red-uctions in senior executives contributed to a healthier Budget.

“Some evidence of this strict expense control can be found in the fact that recurrent spending in the Health Department grew 2 per cent in 2018, down from an average of 8.9 per cent during the preceding decade,” S&P Global said.

“We believe that the WA economy has passed its cyclical trough and resumed growing again.”

Mr Wyatt said the lift to a stable rating was proof the Government’s fiscal plans were working.

“We have put the economy back on the right track and this decision alone will save tens of millions in lower interest payments,” he said.

“Given the debt burden we were left this is a tremendous boost for every Western Australian.”

Credit downgrades by ratings agencies had left WA facing the highest interest rates on its debt of any State. A stable rating should narrow the difference.