‘Highly likely’: downgrade threat after surplus call
Doubts have grown over a surprise surplus call as the state government prepares for a “highly likely” credit rating downgrade due to rising debts.
Queensland’s Liberal National government unveiled its second budget on Tuesday, offering cost of living cuts as it ramps up construction for the 2032 Olympics.
Finance Minister David Janetzki faces a tough balancing act after the government vowed not to cut public service jobs and stuck to its “no new, no tax increases” slogan.
Mr Janetzki said the government was charting a “path to surplus” amid rising utility costs and the massive Brisbane Olympic buildings.
A surplus of $619 million was forecast for 2029/30; This meant Queensland would make landfall for the first time since 2023/24.
The treasurer credited steady revenue improvements and “careful management of expense growth.”
But the overestimation has come under criticism from the state opposition, which called it “too weak”.
“We’ve seen significant explosions in election pledges,” said Labor leader Steven Miles.
“Any more eruptions along the way will eliminate that redundancy, and you should expect them to continue in the same way they started.”
Coal royalties and stamp duty look set to help return Queensland’s budget to surplus.
The LNP government is expected to make around $7 billion from royalties in 2026/27 due to a forecast rise in coal prices.
Queensland’s budget documents also showed total stamp duty revenue increased by $4.2 billion over the four years to 2028/29.
But one expert has warned that coal royalties are a variable source of revenue and long-term spending promises may not be delivered.
University of Queensland Business School professor Shaun Bond said stamp duty was likely to weaken due to the slowing property market and the impact of higher interest rates.
Rising debt is also likely to cause concern for the Queensland government as it tries to avoid another credit rating hit.
Total government debt is expected to reach $142.4 billion this year and rise to $216.5 billion in 2029/30 as the Games build.
Mr. Janetzki said that forward-looking projections show that total government debt will be lower each year than previously anticipated.
But he warned that a dire credit rating downgrade was on the horizon, blaming the previous Labor government.
“Certainly, Labour’s legacy has made it likely, even inevitable, that we will be downgraded, but I’m not giving up,” Mr Janetzki said.
Queensland’s AA+ credit rating was downgraded for the first time in 15 years when it went from stable to negative in February 2025.
It warned that there was potential for further decline if the budget was not balanced within two years; This was a move that would set borrowing costs higher in the race to complete projects by 2032.
