The outlook for Canberra's AAA credit rating remains stable, despite a sharp increase in debt, Standard and Poors ratings agency analyst Anthony Walker says. .
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Debt has increased sharply in the past two years, as the government borrows for its big-picture infrastructure program and to pay for the Mr Fluffy buyback and demolition program. Net debt was just $500 million in 2013-14, jumping to $1.35 billion in 2014-15, and $2.23 billion in the 2015-16 budget delivered this week.
The first jump increase was a decision by the government last year to borrow for infrastructure; the second is largely related to the Fluffy buyback.
The budget also includes funding to pay for the $783 million tram project, but the government plans to sign up a private partner to deliver the project, paying the consortium a lump sum of about $375 million in about 2019, then an annual fee after that.
The ACT's debt was 1 per cent of gross state product, rising to 4 per cent in 2014-15, and now set to rise to 6 per cent of gross state product, peaking at 7.5 per cent in 2017-18.
ANZ senior economist Cherelle Murphy said while the budget showed a deterioration in the government's financial position, with higher spending as a result of the Fluffy scheme, lower revenue from the goods and services tax, and higher debt, the ACT's indebtedness was still low compared with other jurisdictions.
"It has been a difficult economic environment for the ACT Government, with the Commonwealth's fiscal consolidation plan ongoing, while there have also been downward revisions to the ACT's expected GST revenue," she said.
"The government has chosen to offer substantial compensation related to the Mr Fluffy affair and this has lifted expenses in 2014-15 in particular. The budget bottom line will look worse as a consequence and the net debt projections rise from next financial year."
