Debt bomb: States spent up big on Covid; this year we’ll be half a trillion in the red
The states ratcheted up their combined debt by $140 billion to deal with Covid-19 as the overall debt level was tipped to reach $500 billion this year, according to credit rating agency Standard & Poor’s.
One in five home owners send at least a third of their salary directly to the mortgage. (File image).
The agency’s level of debt in Queensland was a likely $125 billion by 2025, a figure that tallies with Government estimates.
But the agency said the states were acting prudently and the extraordinary level was the result of a ramp-up of infrastructure funding, which the states did to increase job and stimulate the local economy.
Combined deficits had fallen by $83 billion and S&P said it was more likely that budget deficits would continue to fall.
It has retained Queensland’s credit rating of AA+.
S&P did not expect the states to use asset sales to reduce their debt, except in NSW. It said most states either had a policy against this or, in the case of Victoria, had few assets left to sell.
The agency said the Australian economy was performing strongly and there was unlikely to be any significant impact from the war in Ukraine because Australian trade with it and Russia was minimal.
However, it did raise concerns about China, which accounts for about 30 per cent of Australian exports and relations have been strained since the Federal Government started criticising China over its aggression against Taiwan and for militarising the South China Sea.
“We have not seen any improvement. There have been some quite pointed comments from our Government,” S&P said.
“We are not expecting any improvement in the trade with China.”
It said there was likely to be a benefit to Queensland from rising commodity prices, particularly coal and LNG, for which the State Government earns royalties.
