Ratings agency Moody’s has today affirmed the McGowan Government’s strong Budget management and economic response to COVID-19, with Western Australia retaining its strong credit rating – Aa1 with a ‘stable’ outlook.
The ‘Aa1’ credit rating from Moody’s is the second highest rating available and is one notch below ‘Aaa’, and follows the assessment of the 2020-21 State Budget released on October 8, 2020.
Western Australia’s credit rating was upgraded in June 2019 to Aa1, following multiple downgrades under the previous Liberal National Government.
Moody’s rating assessment is based on the view that Western Australia’s ‘large economy will remain resilient to coronavirus related disruptions and underpin its capacity to service the State’s growing debt burden over the next three to four years’.
Moody’s has credited WA’s ‘rapid’ economic recovery with the early easing of restrictions in the State, due to the hard border, and a strong mining sector.
Moody’s expect that the ‘State’s economy will continue to outperform its Australian peers over the next two to three years, augmented by the solid business investment projections and State Government’s stimulus measures’.
The credit ratings agency has endorsed the McGowan Government’s fiscal policy leading into the pandemic, highlighting that it provided the government with financial capacity to stimulate the economy.
The Government’s change in fiscal strategy has been redirected from debt reduction to keeping WA safe and strong through the WA Recovery Plan, stimulating the State’s economic recovery and creating thousands of local jobs.
Moody’s note that the additional expenditure and foregone revenue due to the McGowan Government’s WA Recovery Plan, will reduce the State’s operating surpluses. Despite this, surpluses are projected to average 8.7 per cent of operating revenue over the forward estimates which Moody’s expected will ‘outperform’ other States and Territories.
Moody’s also notes operating surpluses have been supported by high iron ore prices, partly compensating for lower GST and tax revenue.
Moody’s assessment further highlights the importance of the McGowan Government’s decision to ensure the mining sector remained open throughout COVID restrictions.
Moody’s note that although the local economy appears relatively shielded, the risk of an outbreak of COVID-19 would present a shock to WA’s revenue and expenditure.
As stated by Treasurer Ben Wyatt:
“By keeping WA safe and strong, Western Australia can recover from COVID-19 stronger than ever.
“Our fiscal and health strategy has been affirmed by Moody’s, which predicts the WA economy will outperform other States and Territories over the next two to three years.
“A credit rating of Aa1 during a pandemic, higher than when the previous Liberal National Government left office, is something all Western Australians can be proud of.
“The McGowan Government’s management of COVID-19 has allowed WA’s economy to restart earlier, returned business confidence, and spared the State from the more devastating impacts experienced globally.
“Moody’s has reiterated that the McGowan Government’s hard work to repair the finances has given the State the capacity to respond to COVID-19 and to redirect this to stimulating the Western Australian economy.
“The 2020-21 Budget delivers the multi-billion dollar WA Recovery Plan, a record $27 billion infrastructure investment, and support for businesses and households to drive our economic recovery.”