The Territory continues to feel the impact of the brutalFederal Government $500 million annual GST cuts with credit rating agencyMoodys today saying it was the main cause of therating downgrade from Aa2 to Aa3.
The new rating will still see the Territory retain a Prime 1investment grade, with Moodys also changing the Territorys outlook fromnegative to stable.
Moodys said the reason for downgrading the Territory to anAa3 position is:
Therating action reflects the Territorys deteriorating stand-alone creditprofile, as captured by its BCA, due to weakening revenue in the wake of slowereconomic growth and lower Goods and Services Tax (GST) receipts.
The main cause of the weakening fiscal positionis the cumulative effect of the lower GST grants from the CommonwealthGovernment of Australia (the Commonwealth, Aaa stable) as announced in thefiscal 2018, 2019 and 2020 budgets.
The last credit downgrade for the Territory occurred in 2016during the CLPs final year in Government. Under the CLP, Moodys said: The ratings downgrade reflects theTerritory's deteriorating financial performance and that Largerdeficits, partially offset by asset sales proceeds, are in turn projected todrive up the Territory's debt burden.
While Moodys acknowledged the Territory Labor Governmentsplan to fix the budget and return to surplus in 2027/28, the decision todowngrade is not a surprise considering the challenging economic timesfollowing the wind down of INPEX construction and the Federal Government GSTcuts.
Treasurer Nicole Manisonsaid to tackle those challenges, the Territory Labor Government commissioned an independent report, chaired by former WAUnder-Treasurer John Langoulant, to deliver a clear plan to fix theTerritory budget.
The plan(announced in April) will see the a reduction in Government expenditure throughmeasures including freezing pay for politicians and public service executive,and a 10% reduction in executive positions.
Government willalso cut red tape to attract private investment to create local jobs and growour economy.
Government is also already implementing more immediatesaving measures through the rootand branch review into departments and programs.
QUOTES from Treasurer Nicole Manison:
When we came to government we inherited an $876milliondeficit from the CLP and a declining economy as INPEX construction wound down.
Then the Federal Government cut $500 million per annum fromour GST.
Today in their rating determination, Moodys has againhighlighted the devastating impact the Federal Government GST cuts have had onthe Territory budget.
"Our plan to fix the budget is already underway and will see the budgetreturn to surplus in 2027/28.
The plan provides a sensible way forward for the Territoryfinances that will continue to support Territorians by creating local jobs and growing the economy, and we will continue toinvest in education, health, housing and community safety.
This is in stark contrast to the CLP who cut front-lineservices and jacked up price prices by 30%.
