Rebecca Hvratin.

A fully state-funded stadium could be a concern to ratings agencies, Standard & Poors (S&P) analyst Rebecca Hvratin tells Tasmanian Times. She and Tom Allen discuss the overall financial position of Tasmania’s finances.

Is it true that S&P is considering downgrading Tasmania’s credit rating? 

In November last year, we changed our outlook from stable to negative, meaning we gave a one in three chance that we could downgrade Tasmania’s credit rating. 

In your November 2021 analysis, you referred to the $375 million State Government funding for the stadium. It has since said it will bear the entire cost. What does this change? 

We just evaluate what the government decides on. If it provides funding for the new stadium, and if that were additional and not included in the Budget, that could be a concern for us. In November 2024 we thought that the $375 million would be the ceiling, but it now looks like that cost could increase, and with it the risk of financial burden to the state. 

Saul Eslake has suggested state debt could reach $16 billion by 2035. Does this concern you?

I am not across the details of his forecasting, but I can say that we take a whole of state view, including GBEs (Government Business Enterprises) too. We’re predicting that that debt level could be reached by 2028. We’ve noticed that general government debt is remaining relatively stable but the level of debt of GBEs has been escalating, including renewable energy projects through Hydro Tasmania and TasNetworks. 

Given the rising debt levels of Government Business Enterprises, do you have a view on privatisation?  

There are varying degrees of success on privatisation. Victoria got rid of state-owned enterprises, which means it has had less flexibility for asset sales to raise revenues. States like Queensland still control their state assets like electricity, which could be impactful in terms of revenues and expenditure for the state’s finances. It really depends.  

It’s not unrealistic that the cost of the stadium, if it proceeds, could blow out. Coming on the back of the AFL training facility and Spirit of Tasmania cost blowouts, could another cost blowout impact on Tasmania’s credit rating? 

One of the reasons we changed the outlook to negative is these cost pressures challenge the state to deliver services. The last budget shows that costs have escalated substantially. Tasmania’s revenues are more reliant on GST than other states. This is one of the factors we look at. States traditionally can use the operating surplus to fund capital expenditure projects but if Tasmania’s surplus tips into negative, there’s then a question about how to get back into a positive space. 

Does Tasmania need to consider new revenue-raising measures? 

In terms of this new budget there were no new tax or levies introduced. In Tasmania, the fiscal strategy has been loosening over the last couple of years, with less focus on financial discipline and less appetite for revenue-raising measures.  

What’s the future for Tasmania’s credit rating? 

It’s not a done deal. It still has a double A-plus rating, the second highest in the world, and it comes off a very low debt base compared with domestic peers. Looking at a percentage of operating revenues, Tasmania’s is currently around half that of other states. There’s still a buffer there for raising more debt although headroom is eroding.

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