Monday, 18 February 2013 15:15
Western Australia's financial ratings outlook remains negative, because of the boom state's mounting debt, as it spends big on infrastructure for a growing population and resources sector.
Ratings agency Moody's Investors Service has reaffirmed its negative ratings outlook for WA after warning in December that high debt levels were putting the state's AAA credit rating at risk.
In its annual credit report on Monday, Moody's said WA had "ample budgetary flexibility" and a robust resource-based economy but would only regain a stable ratings outlook once its Liberal-led government narrowed the widening gap between its income and debt.
WA's challenges include increasing revenue volatility, particularly with the wavering iron ore prices it relies on.
"The state's projected cumulative cash deficits could push its debt burden over 100 per cent of revenues by 2013-14, which would be high when compared with other Australian jurisdictions," Moody's said.
The WA government was trying to curb annual spending growth to 3.8 per cent, compared with 9.9 per cent over the past four years but that could prove difficult.
An even tighter leash would be needed to keep expenditure under control, Moody's said.
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