'The Budget is tight': ACT credit rating retained but Barr warns election rivals on big infrastructure promises

Chief Minister Andrew Barr has used the retention of the ACT’s AA+ credit rating to warn his election rivals about making big promises in the current budgetary environment.

Last September, S&P Global downgraded the credit rating from the highest rating, AAA, to AA+ in the wake of the pandemic, the first time the ACT’s rating had changed since February 2003.

On Wednesday, it reaffirmed the current rating but revised the outlook on the ACT to negative from stable following a slower recovery in fiscal outcomes than we expected, noting that the territory’s operating performance had been weaker than all AA+ rated subnational governments globally.

“The loosening of expenditure control and lack of clear fiscal targets has weakened our view of ACT’s financial management,” it said.

“ACT’s operating balances will be the weakest of all Australian states and territories over fiscal years 2022-26, including Victoria.”

Mr Barr said it was important that the ACT stuck to its budgeted path of fiscal recovery.

“Current economic conditions, infrastructure and labour costs and the needs of a growing community for targeted government support, at a time of acute cost of living pressures, mean the Budget is tight,” he said.

Mr Barr said that in order to maintain the fiscal recovery trajectory set out in the ACT Budget, any significant new recurrent spending would need to be offset against existing budget expenditure growth provisions, new revenue and reprioritising existing spending.

“Parties contesting the ACT election will have to outline how their promises can be achieved in these economic and fiscal circumstances,” he said.

“$10 billion public housing spends, city stadiums, accelerated delivery of light rail, and aggressive tax cuts are either unachievable or will have a significant impact on the ACT Budget over the next decade.”

But Opposition Leader Elizabeth Lee said Mr Barr had botched yet another Budget and another rating downgrade was on the way.

“Andrew Barr’s debt is out of control and the negative outlook means another downgrade is virtually inevitable,” Ms Lee said.

“Throughout this term alone, we have also seen hundreds of millions of taxpayer dollars wasted by the Labor-Greens government, including the $76 million failed HR system, dodgy CIT contracts and cost blowouts of projects that have long been delayed.”

Mr Barr said the S&P update made clear that any decisions to add major infrastructure projects to the already significant $8.1 billion project pipeline were fiscally irresponsible.

“That’s why the ACT Government has been making key decisions to map out infrastructure projects over the next decade and shift investment decisions to more financially achievable projects,” he said.

“This includes the decision to not proceed with a city stadium, focusing instead on the Bruce project that will cost considerably less.”

Mr Barr said the ACT only had a limited capacity to undertake major infrastructure projects.

The government’s major project priorities over the next term were the completion of the new CIT at Woden, Light Rail Stage 2A, the Northside Hospital and the new Canberra Lyric Theatre.

“These types of projects require extensive planning and early engagement with industry to ensure they achieve value for money outcomes for Canberrans,” Mr Barr said.

Mr Lee has said that a reallocation of infrastructure funding would be necessary to help pay for its city stadium proposal. She will outline the Canberra Liberals’ infrastructure priorities closer to the election.

Mr Barr said the government could have chosen a faster path to Budget repair by cutting or reducing government services, cutting public service jobs, raising taxes and charges or not providing wage increases to our workforce.

But this would do more harm than good in the long-term and lead to a weaker local economy, and hurt local businesses and families, he said.

Mr Barr said the Budget delivered a strong increase in the net operating cash position over the four years to 2027-28, which boosted capacity to fund key infrastructure projects like new schools, roads and hospitals.

There was also an immediate need for government investment in housing that was affordable, accessible and appropriate to people’s needs.