Debt among Australia’s states is set to soar in combating the coronavirus pandemic, reducing their buffers against further shocks, a global rating agency has warned.
State government bonds have already surged past $300bn.
Standard & Poor’s credit analyst Martin Foo said the states had committed tens of billions of dollars to emergency measures this year.
“There is more red ink to come,” he said on Wednesday.
“Upcoming annual budgets will likely contain new initiatives, to be paid for with debt.”
He said the recession was driving deeper budget deficits, as tax revenues plunged and emergency fiscal support flowed.
“But borrowing costs should remain manageable with yields at historic lows,” Foo said.
However, even prior to the onset of the pandemic, S&P expected debt to climb, as eastern states planned large infrastructure projects.
“Federal policymakers are now piling pressure on the states to deliver more infrastructure stimulus during the next two years,” Foo said.
