October 31, 2017

Rating agency warns on McGowan Government spending

Credit ratings agency S&P Global has warned the McGowan Government it must curb its spending and achieve its budgeted savings or risk a downgrade.

Shadow Treasurer Dean Nalder said the decision by S&P Global to retain WA’s AA credit rating was a good outcome for the State but came with clear warnings for the State Government.

“The report noted the McGowan Government would find it very difficult to achieve both the savings
and the reduced spending it booked in its 2017/18 Budget,” Mr Nalder said.

Mr Nalder said the report also noted the McGowan Government would struggle to find the savings it had promised in the public sector given the cuts already made to wages growth and in public sector operating costs by the previous Liberal-National Government’

“We believe the spending targets could be difficult to achieve, especially after a number of years of restraint in public sector wage growth and public sector efficiency drives, as well as pressure to provide higher levels of public services,” the report said.

The report also noted that economic recovery in WA would only be possible when the State’s share of GST revenue increased significantly.

“This should also be a concern for the McGowan Labor Government because they know none of their Federal colleagues, or Labor state counterparts are in favour of reform of GST distribution,” Mr Nalder said.

“I think the voters, along with the credit rating agencies, will be watching carefully for the McGowan Government’s second budget in six months’ time to see how it will fund the balance of its $5 billion in election promises.”

Mr Nalder said the report also noted the “concerted effort of the previous government to slow the rate of expense growth” following the collapse of iron ore prices.

“The McGowan Government has put a lot of effort into throwing mud at the previous Government, however this report puts the future of the State’s finances firmly in the hands of the McGowan Labor Government,” Mr Nalder said.

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Denice Rice
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