S&P has downgraded Tasmania’s credit rating to AA, putting the state on par with Victoria and the ACT as the lowest-rated jurisdictions in the country.
The move comes just days after Moody’s also cut Tasmania’s rating, shifting it from AA2 to AA3.
Independent economist Saul Eslake said the latest downgrade should come as no surprise.
“This is the first time that S&P has downgraded Tasmania since it was rated for the first time (as AA-) in 1993,” he wrote online.
“It was upgraded to AA in 2001 and again to AA+ (where it had been until today) in 2004.”
S&P pointed to “very weak” budget metrics and “strong growth in operating expenditure in recent years” as key reasons for its decision.
The agency also singled out the proposed Macquarie Point stadium, warning the state could be left to cover cost overruns beyond the current $1.1 billion estimate.
Tasmania’s debt burden is forecast to rise to 131% of operating revenue by 2028, up from 60% in 2023.
S&P said it may consider another downgrade if the state continues to run operating deficits or if debt rises faster than expected.
Eslake said the decision largely confirmed what financial markets had already priced in.
“It is nonetheless politically embarrassing for the state government,” he said.
He also criticised the government for delaying any significant corrective action until May, when the next full state budget is due, despite Treasury warning for years that spending needed to be reined in.
