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Western Australia is the only state or territory in the country to have the top credit rating from both major international rating agencies, after Moody's Investor Services upgraded it to AAA today.
Key points:
- WA now has a AAA credit rating from Moody's and Standard and Poor's
- The state lost its previous AAA ratings in 2013 and 2014
- In a report, Moody's described WA as "an outlier" to its peers
The decision by Moody's follows the decision by Standard and Poor's to do the same last June.
The state lost its AAA credit rating from S&P in 2013, and from Moody's in 2014.
In announcing the decision, Moody's highlighted WA's financial performance as an "an outlier to its domestic and international peers".
"The state generated excellent revenue growth and strengthened its fiscal buffers over recent years through the successful management of the pandemic combined with sustained fiscal discipline, which Moody's expects to continue going forward," the agency's report read.
"Despite the economic disruption caused by the pandemic, and recent weakening of global economic conditions, the state has improved underlying revenue diversity on account of the ongoing diversification and rapid growth of the economy relative to other Australian states and territories.
"Nevertheless, Moody's expects the broader Australian economy to represent the largest single source of budgetary revenue (39 per cent in 2023-24 financial) for Western Australia, through goods and services tax (GST) distributions and other Commonwealth grants and transfers."
Moody's vice-president and senior credit officer John Manning said the organisation expected WA to be well-placed to withstand the headwinds currently buffeting the global economy.
"We expect Western Australia's exceptionally strong financial performance and debt management, as well as very strong governance, will continue to boost its financial performance such that its credit profile will remain resilient to external shocks, consistent with the highest-rated issuers globally and across sectors," he said.
WA's net debt levels have fallen from a projected $43.7 billion in 2017 under the previous Liberal-National government to $27.9 billion, saving the state around $4.3 billion in interest payments.
Upgrade due to 'years of hard work': premier
In a statement, Premier Roger Cook said the news reflected the Labor government's "years of hard work and responsible financial management to turn the state's finances around since coming to office in 2017".
"Under my government we continue the focus on strong financial management, invest in what matters, pay down debt, diversify the Western Australian economy and create jobs for future generations," he said.
Moody's credit rating bump comes a day after the state government announced an extra cost-of-living relief measure that is expected to save 9,000 of the most vulnerable households about $1 a day in electricity bill savings.
Treasurer Rita Saffioti said a conservative approach to "day-to-day" spending had allowed the state to invest in larger infrastructure developments.
"It's given us capacity to build hospitals, build roads, build rail, build police centres, being able to build schools, without having to rely too much on borrowing," she said.
Ms Saffioti said while the mining industry played a big part in WA's economy, especially in recent years, diversification was a key priority of the government.
"We're doing a lot of work to not only look at our traditional strengths like iron ore, but then look at how we support new industries and in particular other new royalty revenue-making streams like lithium," she said
Fears most vulnerable 'missing out'
The WA opposition welcomed the upgraded rating, but said the government's approach of favouring big-ticket infrastructure items meant the most vulnerable people were being left behind in the cost-of-living crunch.
Shadow treasurer Steve Thomas pointed at the government's most recent extra electricity bill relief announcement — which will give excess power generated by solar to some households for free — and described it as a "paltry effort".
"Cost of living is the biggest issue facing West Australians at the moment. People at the household level are missing out," he said.
"This is a government that Moody's has said is rolling in cash from iron ore royalties and federal government grants. This is a government that could afford to do so much more."
Dr Thomas also refuted the idea the state government was sufficiently diversifying the economy.
"It is only focused on spending on infrastructure as the outcome of its windfall gains, and this single focus at the expense of a more balanced fiscal approach is the threat that remains," he said.
Dr Thomas highlighted that while the state's debt remained stable as a percentage of revenue, it still heavily relied on iron ore prices.
"When the inevitable correction comes the percentages will change," he said.
"The Western Australian government does not have an adequate focus on diversifying our economy, and debt is forecast to rise over the next four years, not fall."
The state government has said it has taken a conservative approach to debt projection, and the actual debt will likely improve from forward estimates.