Queensland’s economic outlook has deteriorated sharply under the Liberal National Party government led by Premier David Crisafulli, primarily due to rising public spending and declining coal royalties, according to a recent report from ratings agency S&P Global. The state’s credit rating was downgraded from AA+ to AA last month—the first downgrade in 17 years—reflecting concerns over escalating debt and operating costs.

S&P projects that total state interest costs across Australia will reach $40 billion by 2029, representing 7 percent of operating revenue—double the pre-pandemic ratio of 3.5 percent. Queensland’s worsening fiscal position has been attributed to “ballooning” expenses, combined with a significant drop in coal royalties following the post-pandemic price decline. This also contributed to a reduced share of Goods and Services Tax (GST) grants for the state.

Martin Foo, S&P’s sovereign and international public finance ratings director, stated in an online briefing that the Crisafulli government, elected in October 2024, has not succeeded in slowing the growth of operating expenses. He noted Queensland’s operating expenditure is forecast to increase by an average of 7 percent annually between the 2024 and 2027 financial years. Foo cautioned that reversing this trend would be challenging without making widespread budget cuts or disrupting public services.

The Crisafulli administration has been careful to avoid the unpopular austerity measures implemented by the previous one-term Campbell Newman government, which included significant public service job cuts and state asset privatisations. However, Premier Crisafulli and Treasurer David Janetzki have placed blame on the preceding decade of Labor governance for the state’s fiscal difficulties, a view that the ratings agency’s analysis somewhat questions.

S&P analyst Deriek Pijls highlighted concerns over Queensland’s capital expenditure, including $10.5 billion planned for venues related to the Brisbane 2032 Olympic Games. Citing a 2024 University of Oxford study, Pijls noted that no Olympic Games since 1988 have been completed within budget, suggesting financial risks ahead for the state.

In contrast, New South Wales received positive remarks from S&P for managing expenditure growth, projecting narrower operating deficits, and exercising caution over infrastructure spending. Victoria, however, is expected to bear the highest interest burden among the states by 2028-29, with debt forecast to exceed 220 percent of operating revenue and interest payments consuming nearly 10 percent of operating revenue.

S&P warned that interest costs surpassing 10 percent of operating revenue could undermine the credit assessments of several states. While Victoria’s finances are recovering after a prolonged period of deficits, aided by tax increases and planned savings, maintaining fiscal discipline is deemed critical, especially with the state election scheduled for November 2026. The report also cited the Victorian and NSW elections, a softening property market, and rising interest rates as potential risks to financial forecasts in the coming year.

Rebecca Hrvatin, another S&P analyst, expressed ongoing concerns about cost overruns and funding uncertainties for Victoria’s major infrastructure projects, particularly the Suburban Rail Loop and Airport Rail. Although recent federal commitments have improved funding prospects for the Suburban Rail Loop, a significant gap remains. Overall, the ratings agency emphasizes the need for prudent fiscal management across state governments to avoid further credit downgrades amid mounting debt pressures.