Shadow assistant treasurer Andrew Leigh says it's "absolutely critical" the ACT maintains its AAA credit rating, and warned of repercussions if the Canberra Liberals were elected and dumped the light rail.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The federal Labor MP's comments follow a warning from Infrastructure Partnerships Australia, which said, "Any scheme to dishonour Canberra's light rail contract will pose large compensation and reputation costs; and could quite foreseeably see the territory stripped of its AAA."
The ACT Labor government revealed last month that dumping the project would cost between $220 million and $280 million.
But there was some differences over what impact losing the AAA credit rating would have on the ACT. Earlier this week, Mr Barr told The Canberra Times the impact would be negligible.
When a credit rating was downgraded it could, in some cases, result in increases to interest rates on government debt, reflecting the higher risk of lending. But Mr Barr said much of the territory's borrowings were already locked in at low rates.
But Dr Leigh said: "My sense is that it would still be tangible and I know Andrew [Barr] is concerned about the risks to the AAA credit rating."
"There's certainly an impact on the reputational risk of the ACT, there's also a general impact on business confidence. Places that get revenue downgrades, that tends to rattle businesses," Dr Leigh said.
The territory's rating – one of just three remaining AAAs at the state and federal level – is already facing threats from the federal level.
The outlook for Australia's credit rating has been changed to "negative" from "stable". Given a state or territory can't have a higher credit rating, or a different outlook, than the federal government, the ACT will now have its outlook changed to negative.
Mr Barr had repeatedly used the territory's triple-A rating as a mark of the success of economic reform, including taxation reforms.
It was also used in this year's budget to show that spending on light rail, a major area of attack from the opposition, had not had an impact on the government's credit rating.
Asked if credit ratings should be taken as seriously as they have been, Dr Leigh said: "They still do matter. Credit ratings agencies aren't perfect, but that's the system we have and they do have an impact on countries borrowing costs."
