S&P Global warns Australian states’ credit ratings are at a 25-year low
Australian state governments are racking up a further $660bn in public debt due to spending “like they are in COVID lockdown” - prompting a major new debt warning.
The warning, issued by S&P Global, points to Australian states’ worsening debt with credit ratings now at their lowest point in 25 years.
S&P Global analyst Martin Foo says Australia’s smallest states have caught the borrowing bug.
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By continuing you agree to our Terms and Privacy Policy.“Some Australian state governments are spending like they’re still in pandemic lockdown,” he said.
“In line with our predictions last year, we see an ongoing risk that they will further delay post-pandemic fiscal repair.”
According to the credit rating agency, the state’s combined cash deficit ballooned in 2025 to about 16 per cent of revenue, matching the COVID low period of 2021.
They project state government debt to roughly triple between 2019 and 2027.
Collectively, the seven states and territories the S&P Global monitors are in $660bn debt or 24 per cent of the state’s GDP.
This figure excludes the Northern Territory.
While the average Australian state government rating is still a AA+, S &P Global warns this is declining, with both NSW and Queensland having a negative outlook for 2026.
Both the Australian Capital Territory and Tasmania were downgraded to AA in 2025.
Mr Foo says the state and territory governments face some similar spending challenges.
“Common obstacles facing Australian states include combative public-sector wage negotiations, widespread community demands for more entitlement spending, and a broad aversion to tax increases or economic reform,” he said.
Originally published as S&P Global warns Australian states’ credit ratings are at a 25-year low
