Western Australia, suffering revenue losses from weak iron ore prices, has been hit with a negative credit outlook by Moody’s Investors Service.
Moody’s revised the outlook on the state Treasury Corporation’s Aa1 ratings to negative from stable. At the same time, Moody’s has affirmed the debt and issuer ratings at Aa1.
The rapid rise in iron ore and other royalties, as commodity prices spiked to record highs, pushed up the state’s reliance on this revenue to 21.6% of income in 2013-14 from 8.4% in 2006-07.
At the same time, the windfalls fuelled a rapid rise in spending with significant enhancements to healthcare, education and justice services.
However, with a halving of iron ore prices over the past 12 months, along with a reduction in GST revenue, the state has forecast a record high deficit equal to 13.8% of revenue for 2015-16.
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