WA’s economic strength leads to AAA credit rating

WA is one of a small number of jurisdictions globally – and the only state or territory in Australia – to be given the top credit rating from two major international ratings agencies.

Moody’s Investor Service says WA is “an outlier to its domestic and international peers”. 

Its AAA credit rating is underpinned by its strong financial performance, sustained budget surpluses, controlled debt management, and revenue diversity. S&P Global upgraded WA to AAA credit rating in June last year. 

“We expect WA’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,” says John Manning, Moody Vice President and Senior Credit Officer. 

Aaron Morey, CCIWA Chief Economist, says tight fiscal management and a “little bit of luck along the way” with high commodity prices – principally iron ore but also LNG – are contributors to the strong ratings. 

“When you’ve got two AAAs you’re a two-times premiership player,” Aaron Morey says.  

“The focus and the priority for us is now devolving that decision making around growth and diversification into the hands of businesses, putting more money in the hands of businesses, enabling them to make their own investment decisions. 

“The most direct way to do that is to address what is the current unfair situation where our businesses face the highest payroll tax in the country.” 

Despite the economic disruption caused by the pandemic, and recent weakening of global economic conditions, Moody’s says WA has “improved underlying revenue diversity on account of the ongoing diversification and rapid growth of the economy relative to other Australian states and territories”.  

Treasurer the Hon Rita Saffioti says the upgrade will ensure the State pays less interest on its future borrowings, “which means we can invest more in key services”. 

“It’s taken around nine years for us to have our AAA credit rating reinstated by Moody’s which highlights the importance of maintaining strong management of the State’s finances,” she says. 

Resilient credit profile 

The stable outlook reflects Moody’s expectations that WA will maintain very strong credit metrics as tight expenditure controls and improving revenue diversification conserve the State’s debt burden at moderate levels, strengthening the State’s capacity to respond to future shocks. 

It also points to Moody’s expectation WA will use future windfall gains from high commodity prices to further diversify its revenue base, pay down debt or fund capital expenditure, helping to strengthen resilience to future commodity price cycles. 

“We need to recognise and acknowledge that WA over many decades has developed its resources; other states and territories cannot say the same thing,” Morey says. 

“That’s why it’s really important that we’re vigilant with respect to the Federal Government’s plans around environmental approvals, and that they don’t get it out of balance, or they don’t go too far and make it harder for WA which is very effective and experienced in getting these major projects up and running.” 

Investing in WA

In an increasingly competitive global environment, WA needs to do more to incentivise international investment, says Morey. 

Opening a WA trade office in Austin, Texas was a recommendation CCIWA made in its 2023-24 Pre-budget Submission. It is expected to help strengthen WA’s investment and trade relationship with the Americas and provide crucial intelligence on how economies across the region are developing. 

“The State Government should remain open to do more given the transformative efforts from other economies, notably the US and Canada, to redirect capital flows to drive decarbonisation,” Morey says. 

If you are looking for opportunities in business, investment or trade, visit the WA Investments platform or contact our experienced team at [email protected].

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