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ACT Retains AAA Stable Credit Rating

By Canfan - 26 September 2014 8

Despite the compounding effects of the Commonwealth Government’s policy to reduce spending and significantly contract the size of the Australian Public Service, Standard & Poor’s has acknowledged the ACT Government’s continued commitment in its 2014-15 Budget to build and transform the ACT economy and provide stability in an uncertain economic environment through affirming the ACT’s AAA credit rating.

International ratings agency Standard & Poor’s has today announced that the ACT Government has retained its AAA credit rating and assessed the outlook for the ACT’s finances as continuing to be ‘Stable’.

The AAA and A?1+ ratings are the highest ratings assigned by Standard & Poor’s.

The ACT is one of a small number of governments in the world to hold this rating. Victoria is the only other state or territory in Australia to hold a AAA Stable credit rating.

Treasurer Andrew Barr says “the AAA rating is an endorsement of Labor’s plan to support our economy and our people at a time when the Commonwealth Government’s policy of fiscal restraint and public sector staffing cuts and reduction in grants and payments to the ACT will have a significant negative impact on the ACT”.

“The record investments in the vital areas of health, education, community services and transformative infrastructure to create jobs and economic activity are the actions required now to protect the long-term growth and the health of our community and this has been recognised in the retention of the AAA credit rating”, Mr Barr said.

Standard & Poor’s said “the stable outlook reflects S&P’s view that the government will manage its financial position and successfully execute its financial strategy. Successful delivery will further support the ACT’s very strong financial management”.

“The ratings on the Australian Capital Territory (ACT) reflect our view of the ACT’s very strong economy and financial management, and its strong budgetary flexibility. We consider the ACT’s financial management to be very strong. The ACT’s political and managerial strengths, debt and liquidity management, and its management of government-related entities support our very strong view of its financial management. We expect the ACT’s tax reforms to be successfully implemented. Further, the ACT has demonstrated its willingness to release land as part of its growth strategy to offset weakening revenue streams”, Standard & Poor’s said.

(Andrew Barr Media Release)

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8 Responses to
ACT Retains AAA Stable Credit Rating
dungfungus 9:08 am 01 Oct 14

HiddenDragon said :

The most recent S&P report is restricted to subscribers, but a little time spent searching will turn up earlier reports, which include comments about the ACT’s “limited financial flexibility”, due to the “mismatch between expenditure responsibilities and revenue-raising capacity”, with more than 40% of revenue dependent upon Commonwealth grants. Given that the ACT “tax reforms” are not meant to reduce that dependence, it is rather difficult to understand how S&P’s are now talking about “strong budgetary flexibility”.

It all boils down to continued heavy reliance on Commonwealth direct spending in the ACT, and continued growth – or at least no appreciable reduction – in the level of general and specific grants. In light of recent news of a federal budget deficit of $48.5bn. for 2013/14, and with serious question marks over terms of trade-related revenue projections for the current and out year budgets, those may well prove to be heroic assumptions.

Whatever spin David Dawes puts on the following story, the outcome is that one of the ACT Government’s main sources of revenue is under threat.
http://www.abc.net.au/news/2014-09-30/land-development-agency-profit-downturn/5778424
I think it is fantasy to suggest this agency trades like a private land development company, the difference being that the LDA pays “nil” for its undeveloped land. To claim that it makes a “profit” is insulting to anyone who has been running a real business.
Has there been a commensurate trimming of staff and operating costs? I guess not.

HiddenDragon 7:05 pm 30 Sep 14

The most recent S&P report is restricted to subscribers, but a little time spent searching will turn up earlier reports, which include comments about the ACT’s “limited financial flexibility”, due to the “mismatch between expenditure responsibilities and revenue-raising capacity”, with more than 40% of revenue dependent upon Commonwealth grants. Given that the ACT “tax reforms” are not meant to reduce that dependence, it is rather difficult to understand how S&P’s are now talking about “strong budgetary flexibility”.

It all boils down to continued heavy reliance on Commonwealth direct spending in the ACT, and continued growth – or at least no appreciable reduction – in the level of general and specific grants. In light of recent news of a federal budget deficit of $48.5bn. for 2013/14, and with serious question marks over terms of trade-related revenue projections for the current and out year budgets, those may well prove to be heroic assumptions.

rommeldog56 1:14 pm 30 Sep 14

HiddenDragon said :

Well, it’s nice to know that they currently think so – it means that the cost of servicing the debt which is being run up by the London Circuit Soviet will be slightly less than would otherwise be the case.

Anyway, this will be one to file away, and see what subsequent events have to say about the ACT’s “very strong economy” and “strong budgetary flexibility” (flexibility – ???) etc.

Yes – they seem to have created some flexibility. You have to give them credit for creating that. Its what they have done to achieve that and their relative priorities, that disgusts me.

eg. Up to trippling of Annual Rates – yeah, some miss guided ning nongs on say that its one of the best decisions the ACT Gov’t hase ever made. Just ignore the fact that the ACT Govt is drip feeding land releases so stamp duty decreases. To me, i just gotta pay my stamp duty on house purchase again over and over and over……

And, more flexibility because the popualtion here are so well paid, they can just jack up ACT Govt fees and charges at will it seems – without much complaint from ACT residents/Ratepayers !

Flexibility to ditch a probable revenue generating new convention centre instead of the loss making Light rail – yeah, right. Thats flexibility for you.

“Felxibility” doesn’t = good decision making. S&P don’t rate that I’m afraid. Roll on 2016 !

VYBerlinaV8_is_back 12:54 pm 30 Sep 14

2604 said :

The same Standard and Poor’s that did such a sterling job of rating subprime mortgage-backed bonds in the run-up to the GFC? That’s comforting.

Having said that, Andrew Barr does have an amazing, Bernie Madoff-like ability to make taxpayers’ money disappear. Which makes S&P’s endorsement quite fitting.

BTW, the idea that the ACT economy will only keep moving if ACT Labor spends a lot of money is a particularly humorous example of Keynes’ voodoo economics. Where does Labor get its money? From ACT ratepayers. What would ACT ratepayers be doing with that money if Labor wasn’t taking it from them? Spending it in the ACT economy. In fact, they’d be spending more money, as they wouldn’t be funding a massive bureaucracy to administer it all.

Agree. With every part of this.

dungfungus 9:11 am 30 Sep 14

In the Canberra Times last Saturday (the first day of a long weekend is always a good time for governments to announce major changes), Andrew Barr has effectively shut down the “must have” new convention centre (one of the key big infrastructure projects announced in the June budget).
While saying that the convention centre has been “pushed back on the agenda” to facilitate the payment of the Mr Fluffy clean-ups, Andrew Barr also takes a reality check saying that “the current convention centre was suitable for a city of Canberra’s size” and it was “unrealistic for the ACT to fund a piece of infrastructure equivalent to a community five times larger”.
He also took a swipe at David Marshall (Canberra Business Council’s main supporter of the new convention centre) by stating that “Mr Marshall’s claims that a new convention centre would generate hundred of millions of dollars were yet to be tested by a business case”.
While I totally agree with that I find it hilarious to hear Andrew Barr telling people to “do as I say and not as I do”. I refer of course to the lack of a business case for the light rail which is suited only for cities like Canberra that have five times the population.
Andrew Barr may be using this announcement to build receptivity in the electorate for another announcement concerning the light rail.
Join the dots.

HiddenDragon 9:19 pm 29 Sep 14

Well, it’s nice to know that they currently think so – it means that the cost of servicing the debt which is being run up by the London Circuit Soviet will be slightly less than would otherwise be the case.

Anyway, this will be one to file away, and see what subsequent events have to say about the ACT’s “very strong economy” and “strong budgetary flexibility” (flexibility – ???) etc.

dungfungus 9:43 am 27 Sep 14

Someone should rate S & P’s ability to survive considering there are so many law suits against them for supplying false information leading up to the GFC.
If things are so good, why isn’t Barr game to fund all Labor/Green dreams by debt?
Even the NT raised money for its water supply through bonds.
Money has never been cheaper to borrow and yet Barr wants to offload (defer?) risk with PPPs.
Given that every commercial venture the ACT Labor government has been involved in has failed at considerable cost to the ratepayer, isn’t it time we all stood up and said “enough is enough”.

2604 10:46 pm 26 Sep 14

The same Standard and Poor’s that did such a sterling job of rating subprime mortgage-backed bonds in the run-up to the GFC? That’s comforting.

Having said that, Andrew Barr does have an amazing, Bernie Madoff-like ability to make taxpayers’ money disappear. Which makes S&P’s endorsement quite fitting.

BTW, the idea that the ACT economy will only keep moving if ACT Labor spends a lot of money is a particularly humorous example of Keynes’ voodoo economics. Where does Labor get its money? From ACT ratepayers. What would ACT ratepayers be doing with that money if Labor wasn’t taking it from them? Spending it in the ACT economy. In fact, they’d be spending more money, as they wouldn’t be funding a massive bureaucracy to administer it all.

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