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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-06-04 Daily Xml
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Ministerial Statement

CREDIT RATING

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:57): I seek leave to make a ministerial statement.

Leave granted.

The Hon. K.O. FOLEY: Just prior to coming into the chamber to deliver my budget speech, I was advised of an embargo on a statement released by Standard & Poor's rating agency. That embargo has now been lifted and it is now a public document. I wish to indulge the house by reading into Hansard a statement that is critically important to our state and its future.

As I said, the budget was designed to maintain our financial strength and our credibility with financial markets and rating agencies. It is no mistake, and the prime purpose of the function we have put into play in our budget is for us to maintain our AAA credit rating, as others were losing it—and I was fearful that we, too, would lose it.

I advise the house today that Standard & Poor's has reaffirmed unaffected the state's AAA credit rating. The document states:

Standard & Poor's Rating Services today said that the budget announced today for the state of South Australia—

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: She is shaking her head. I will start again. It is so predictable. It states:

Standard & Poors Rating Services today said that the budget announced today for the state of South Australia is consistent with the 'AAA' rating and stable outlook already assigned to the state.

The government is projecting non-financial public sector net financial liabilities to peak at 106 per cent of revenue in fiscal 2012. Although this is in excess of the 80 per cent to 90 per cent level which Standard & Poor's has identified as a trigger to reassess the rating, the rating has remained unchanged for three key reasons:

I will read those three reasons into the Hansard.

Ms Chapman interjecting:

The Hon. K.O. FOLEY: Just listen, Vickie. It continues:

The peak in net financial liabilities is only temporary and Standard & Poor's believes that the ratio will decrease in the medium term as projected by the government. The savings measures announced by the government will support the state's operating position and therefore reduce the state's need to borrow additional funds.

The increase in net financial liability partly reflects changes to the discount rate. Using a comparable discount rate for the unfunded pension liability results in net financial liabilities peaking at about 85 per cent of revenue—a level close to that recorded when Standard & Poor's changed South Australia's rating to 'AAA' in 2004. Like most states, South Australia has a history of capital expenditure underspending and is therefore less likely to achieve its forecasted debt levels—

Members interjecting:

The Hon. K.O. FOLEY: I go on, Mr Speaker.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: Standard & Poor's credit analyst, Anna Hughes said:

The government's reprioritisation of some of its capital projects and a revision of its operating expenditure highlights the state's preparedness to manage its finances prudently during the current economic downturn and we have factored this into our assessment of the rating.

They trust this government.

Honourable members: Hear, hear!

The Hon. K.O. FOLEY: The ratings—

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: I have been caught out with my AAA budget. The ratings could be re-assessed—

Members interjecting:

The Hon. K.O. FOLEY: They trust us. They have confidence in us. They believe us.

Ms Chapman: Yes, they know you're hopeless.

The Hon. K.O. FOLEY: They know that I'm hopeless. I think if they thought that, they would have downgraded us and put us on negative watch. Further, Ms Hughes said:

The ratings could be re-assessed if the higher levels of debt appear in Standard & Poor's opinion to be permanent and/or more severe. The two most likely scenarios for this to occur would be a lack of political will or ability to deliver on proposed savings and a further deterioration in the state's revenue base due to a weaker economy.

Clearly, that states that Standard & Poor's and financial markets trust us, believe in us and have confidence in us. What they are saying is that we cannot go on a spending spree at the next election: it must be tight financial and fiscal management.

I will leave you on this note. This Labor government regained the AAA credit rating in the early part of its term, and, in the most difficult of financial times, when states such as Queensland could not maintain their AAA, this Labor government retains our AAA credit rating. We are the government of financial management. We are the government of economic management. We are the government for the future.

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