Fitch cuts South Australia state rating one notch to AA
CANBERRA, Sept 27
CANBERRA, Sept 27 (Reuters) - Fitch Ratings cut the credit rating of South Australia state on Friday by one notch to AA, from AA+, saying the state's fiscal and debt position had deteriorated, with no recovery in sight for at least another three years.
As Australia's new conservative government comes under pressure to review the country's 10 percent consumption tax, or GST, Fitch said even a cost-cutting drive in South Australia had been unable to counter an expected drop off in goods and services tax revenue received from Canberra.
"Modest growth in operating revenue will enable the state to return to a Fitch-calculated surplus and reduce debt from Fiscal Year 2017 onwards," the agency said.
Fitch gave the state a stable outlook, saying the state's centre-left Labor government was focused on limiting expenditure growth through stringent cost-savings to offset liabilities including unfunded pension schemes.
The state's financial position has been hard-hit by declining revenues and spending measures including health and hospital spending. Several rail infrastructure projects have been deferred to help rein-in ballooning debt.
"The base case includes an increase in debt to A$11 billion in FY16 from A$6.9bn in FY13. Finally, the Outlook factors in deficits in the next three financial years and a return to surplus by FY17," Fitch said.
But the agency said SA's ratings could be downgraded further if the state's operating margin continues to deteriorate over the forecast period to fiscal year 2017.
Australia is one of the few developed countries to hold a coveted AAA-rating despite economic turmoil in Europe and elsewhere. (Reporting by Rob Taylor; Editing by Kim Coghill)
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