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Announcement:

Moody's comments on Victoria's 2013/14 budget

Global Credit Research - 07 May 2013

Sydney, May 07, 2013 -- Moody's Investors Service says that the State of Victoria's (Aaa/stable outlook) budget for 2013/14 indicates further deterioration for its financial performance over the next two years, as revenue growth is expected to be slower, while expenditures are higher than projected.

However, the Australian state also projects that improvements will be achieved over the medium term, with a surplus position seen by 2015/16.

For fiscal 2013/14, the state's budget forecasts a deficit in the general government sector equal to AUD1.9 billion, or 3.8% of revenues, which would be larger than the AUD482 million deficit, or 1.0% of revenues, forecast at the time of the 2012/13 budget.

Moody's notes that the primary reasons for the larger projected deficit are an expected slower rate of growth for Goods and Services Tax-backed Commonwealth grants -- due to a lower pool of grants, and a revision in the state's anticipated share of these grants -- along with greater capital spending. In addition, the impact of non-cash accounting changes for superannuation payments is also expected to increase the deficit.

Similar developments are expected to delay the state's expected return to surplus by one year. While Victoria had in 2012/13 projected that a surplus equal to 2.2% of revenues would be achieved by 2014/15, it is now forecasting a deficit of 1.6% of revenues. Moody's noted that this expected result also reflects the pull forward of capital expenditures from future years.

In response to these negative trends the state government has announced revenue and expenditure measures, including an increase in the congestion levy, the removal of the First Homeowners Grant for existing properties, and the elimination of subsidies for motor vehicle drivers with perfect records. It estimates that such measures will help it return to a surplus position by 2015/16.

Moody's believes that the government's ongoing resolve to exert strong controls over both current and capital expenditures will be critical to achieving the balanced budget target. In this context, the state has made progress in slowing its rate of expenditure growth in recent years, but reducing annual increases further to a very low 2.7% over the next four years -- as is currently forecast -- is likely to be challenging.

As part of Moody's normal monitoring process, Moody's intends to conduct an in-depth analysis of the budget and its medium-term impact on the state's financial and debt profile.

This announcement represents an update to markets and does not constitute a rating action.

Debra A Roane
VP - Senior Credit Officer
Sub-sovereign Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

David M Rubinoff
MD - Sub-Sovereigns
Sub-sovereign Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

Moody's comments on Victoria's 2013/14 budget
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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