Queensland’s interest expenses on public debt are projected to increase by up to A$1 billion by 2030 following the state's recent credit rating downgrade, according to new analysis. This development adds pressure to the state’s borrowing costs amid ongoing budget deficits and rising debt levels.
The downgrade was announced last Friday by S&P Global Ratings, which lowered Queensland’s credit rating from AA+ to AA. The decision comes despite the state’s significant resource wealth and growing economy. The rating cut is expected to raise the cost of borrowing for the Queensland government, which finances debt through the Queensland Treasury Corporation (QTC).
Analysis conducted by Tulipwood Economics indicates that the total interest payments on Queensland’s borrowings—including debt held by government-owned corporations—were forecast in the June budget to increase from A$5.48 billion in the last financial year to A$10.87 billion by 2029-30. The downgrade, however, could add as much as A$1.1 billion to interest costs by the end of the decade.
Joe Branigan, director of Tulipwood Economics, noted that the exact impact of the downgrade depends on the state’s debt maturity profile, the pace of debt refinancing, and the spread that investors demand on Queensland bonds. He emphasized that the increase in interest costs will accumulate gradually rather than all at once, coinciding with the years when surpluses are expected to materialize.
Branigan also challenged assumptions in the latest Queensland budget, pointing out that interest expenses are expected to rise faster than borrowing levels because of increasing average borrowing rates. He observed that general government interest expenses are forecast to increase by 73% over the decade, while debt is expected to grow by 50%, meaning a third of the cost increase is attributable to higher borrowing rates rather than new debt issuance. This projection predates the impact of the downgrade.
Queensland Treasurer David Janetzki defended the government’s decision to maintain current spending levels despite the fiscal pressures. Addressing state parliament on Tuesday, Janetzki said he was unwilling to consider tax hikes, cuts to infrastructure projects, or reductions in services. He stressed the government’s commitment to investing in frontline jobs, essential services, and major capital works—including roads, rail, hospitals, schools, and housing—in preparation for the 2032 Brisbane Olympic Games and beyond.
Within the Liberal National Party (LNP), there appears to be minimal appetite to scale back expenditures on capital projects or social services. Sources suggest that Premier David Crisafulli has committed to upholding all funding promises made by the previous Labor government ahead of the 2024 state elections, limiting the government’s flexibility on spending cuts.
A Queensland Treasury spokesperson commented that due to the long maturity profile of the state’s borrowings, the downgrade will not have an immediate impact on borrowing costs. The spokesperson also highlighted Queensland’s strong economic fundamentals and prudent debt management practices as mitigating factors.
QTC managing director for funding and markets Susan Buckley noted that investors have largely priced in the potential for a rating downgrade over an extended period. She stated that credit ratings are just one part of a comprehensive market evaluation that includes liquidity, demand, supply, and other credit fundamentals influencing borrowing conditions.