❓ Mr. Healy asks about S&P's improved credit rating for WA and the agency's assessment of the McGowan government's financial management compared to the previous Liberal-National government. The Treasurer responds positively, highlighting S&P's praise for expense control and contrasting it with past criticisms of the previous government's financial management.
AnsweredQoN 825Legislative Assembly
QuestionView source ↗
STATE FINANCES —
CREDIT RATING
825. Mr T.J. HEALY to the Treasurer:
I refer to S&P Global's
decision last week to improve Western Australia's credit rating. Can
the Treasurer advise the house as to what
Standard and Poor's, in making this decision, had to say about the
McGowan Labor government's commitment
to responsible financial management; and can the Treasurer outline to the house
how this compares to what the global
credit rating agencies had to say about the financial management of both the
previous Liberal–National government and the former Treasurer?
CREDIT RATING
825. Mr T.J. HEALY to the Treasurer:
I refer to S&P Global's
decision last week to improve Western Australia's credit rating. Can
the Treasurer advise the house as to what
Standard and Poor's, in making this decision, had to say about the
McGowan Labor government's commitment
to responsible financial management; and can the Treasurer outline to the house
how this compares to what the global
credit rating agencies had to say about the financial management of both the
previous Liberal–National government and the former Treasurer?
AnswerView source ↗
I thank the member for that very,
very good question. It is, indeed, with some satisfaction that we finally get a
movement to our credit rating that is in a positive direction, after years of
negative decisions by both Moody's and S&P Global over a long
period. I want to quote from S&P, if I can, Mr Speaker —
The state government has maintained
its focus on restraining growth in operating expenses � Some evidence of this
strict expense control can be found in the fact that recurrent spending in the
state's health department grew 2% in fiscal 2018, down from an average
of 8.9% during the preceding decade.
Can I thank the Minister for Health
for his efforts in ensuring that the finances of the state are brought back
under control.
Several members interjected.
The SPEAKER : Members!
Mr B.S. WYATT : I do want to—now
that I am starting to hear some agitation from the other side of the chamber—reflect
on a period that really went through three phases. I will call them the warning
phase, the action phase, and then what we will just call the political will
phase. I want go through these. I want to remind everybody that back in
February 2011, the iron ore price was $US180 a tonne. This is what Moody's
started to say—it was starting to get nervous —
The
government has had difficulty controlling costs �
The rating agencies then started to
move into action after those few years of warnings, when we were still at AAA
but first moved to a negative outlook from S&P, and I quote —
We consider that WA's increased
budgetary reliance on royalties and the strong rises in its expense base � may
pose challenges for WA's budgetary performance in the short-to-medium
term.
At the same time, Moody's said —
Therefore,
the government's resolve to develop and implement a strong policy
response that leads to narrower deficits and a slower pace of debt accumulation
will be of key importance to future credit quality.
That was when net debt was around $15 billion and the
government was still raining in revenue.
Moving forward to what we will call the lack of political
will phase, in September 2013 there was a downgrade from AAA to AA on the basis
of, and I quote again —
� there is likely to be slippage, —
That was in the then government's budget restraint
decisions —
reflecting our view of limited
political will.
Then in August 2014, Moody's moved us down a notch as
well, on the basis of, and I quote —
� a weak policy response to the
deteriorating financial and debt position.
Finally, in April 2015, we were moved onto a negative credit
watch by S&P's—that we have just moved back to stable—and
I again quote —
� limited political will to make
difficult decisions.
This was the reality that the McGowan Labor government was
faced with when it came into office—a government that had shredded all
credibility with the credit rating agencies. Indeed, reflecting upon the
Premier's question a minute ago, one of the biggest challenges that I had
as Treasurer in convincing my Treasury colleagues about the unfairness of the
GST is that they would point to the previous government and say, ''Because
the previous government made such a meal of the finances, why should we agree
to any change?'' But anyway, during a powerful period of advocacy by the
government, we managed to convince the commonwealth government and the other
states to reform our GST processes to get a fairer return. But the reality is
that this has taken some time. It has also taken some time to develop the
credibility that we are a government committed to strong financial management,
because it is through strong financial management that we can actually deliver
sustainable and ongoing services to the people of Western Australia, not simply
spend money we do not have, without any focus whatsoever on the future, and
then leave future governments to clean up the mess. We are a responsible
government, and that is certainly not how we will be behaving.
very good question. It is, indeed, with some satisfaction that we finally get a
movement to our credit rating that is in a positive direction, after years of
negative decisions by both Moody's and S&P Global over a long
period. I want to quote from S&P, if I can, Mr Speaker —
The state government has maintained
its focus on restraining growth in operating expenses � Some evidence of this
strict expense control can be found in the fact that recurrent spending in the
state's health department grew 2% in fiscal 2018, down from an average
of 8.9% during the preceding decade.
Can I thank the Minister for Health
for his efforts in ensuring that the finances of the state are brought back
under control.
Several members interjected.
The SPEAKER : Members!
Mr B.S. WYATT : I do want to—now
that I am starting to hear some agitation from the other side of the chamber—reflect
on a period that really went through three phases. I will call them the warning
phase, the action phase, and then what we will just call the political will
phase. I want go through these. I want to remind everybody that back in
February 2011, the iron ore price was $US180 a tonne. This is what Moody's
started to say—it was starting to get nervous —
The
government has had difficulty controlling costs �
The rating agencies then started to
move into action after those few years of warnings, when we were still at AAA
but first moved to a negative outlook from S&P, and I quote —
We consider that WA's increased
budgetary reliance on royalties and the strong rises in its expense base � may
pose challenges for WA's budgetary performance in the short-to-medium
term.
At the same time, Moody's said —
Therefore,
the government's resolve to develop and implement a strong policy
response that leads to narrower deficits and a slower pace of debt accumulation
will be of key importance to future credit quality.
That was when net debt was around $15 billion and the
government was still raining in revenue.
Moving forward to what we will call the lack of political
will phase, in September 2013 there was a downgrade from AAA to AA on the basis
of, and I quote again —
� there is likely to be slippage, —
That was in the then government's budget restraint
decisions —
reflecting our view of limited
political will.
Then in August 2014, Moody's moved us down a notch as
well, on the basis of, and I quote —
� a weak policy response to the
deteriorating financial and debt position.
Finally, in April 2015, we were moved onto a negative credit
watch by S&P's—that we have just moved back to stable—and
I again quote —
� limited political will to make
difficult decisions.
This was the reality that the McGowan Labor government was
faced with when it came into office—a government that had shredded all
credibility with the credit rating agencies. Indeed, reflecting upon the
Premier's question a minute ago, one of the biggest challenges that I had
as Treasurer in convincing my Treasury colleagues about the unfairness of the
GST is that they would point to the previous government and say, ''Because
the previous government made such a meal of the finances, why should we agree
to any change?'' But anyway, during a powerful period of advocacy by the
government, we managed to convince the commonwealth government and the other
states to reform our GST processes to get a fairer return. But the reality is
that this has taken some time. It has also taken some time to develop the
credibility that we are a government committed to strong financial management,
because it is through strong financial management that we can actually deliver
sustainable and ongoing services to the people of Western Australia, not simply
spend money we do not have, without any focus whatsoever on the future, and
then leave future governments to clean up the mess. We are a responsible
government, and that is certainly not how we will be behaving.
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