‘Highly likely’: downgrade threat after surplus call

Doubts have been raised over a surprise surplus call as a state government braces for a “highly likely” credit downgrade amid rising debt.

Queensland’s Liberal National government handed down its second budget on Tuesday, offering cost of living relief as it ramped up construction for the 2032 Olympics.

Treasurer David Janetzki faced a tough balancing act after the government vowed not to cut public service jobs and stuck with its “no new or increased taxes” mantra.

Mr Janetzki said the government had mapped out a “pathway to surplus” amid rising public service costs and massive Brisbane Olympic builds.

A $619 million surplus was projected for 2029/30, marking the first time Queensland would be in the black since 2023/24.

The treasurer credited stable revenue improvements and “careful management of expense growth”.

But the forecast surplus came under fire from the state opposition, who described it as “very thin”.

“We’ve already seen substantial blowouts on their election commitments,” Labor leader Steven Miles said.

“Any more blowouts along the way would wipe out that surplus, and you’ve got to expect they’re going to continue the way that they’ve started.” 

Coal royalties and stamp duty look set to help return the Queensland budget to surplus.

The LNP government is expected to make almost $7 billion from royalties in 2026/27 due to a forecast rise in coal prices.

Queensland’s budget papers also showed overall stamp duty revenue had been upgraded by $4.2 billion in the four years to 2028/29. 

But an expert warned coal royalties were a volatile source of income and not something long-term spending promises could be built around.

University of Queensland Business School professor Shaun Bond said stamp duty was likely to weaken as the property market slowed and higher interest rates made an impact.

Rising debt also looks set to cause concern for the Queensland government as it attempts to avoid another credit rating hit.

Total state debt is expected to reach $142.4 billion this year and climb to $216.5 billion by 2029/30 as the Games build ramps up.

Mr Janetzki said total state debt would be lower each year across the forward estimates than previously forecast.

However he warned a dreaded credit downgrade was on the horizon, blaming the previous Labor government.

“Absolutely, Labor’s legacy left us highly likely, or even an inevitability, of getting a rating downgrade, but I’m not giving up,” Mr Janetzki said.

Queensland’s AA+ credit rating was downgraded for the first time in 15 years when it went from stable to negative in February 2025.

It was warned there was potential for further drops if the budget was not balanced within two years, a move that would ensure higher borrowing costs in the race to complete 2032 projects.