S&P downgrades Queensland credit rating over Olympic spending

By Fiona Sterling · 2026-09-11

The rating and the reason

S&P Global Ratings cut Queensland's long-term issuer credit rating one notch from AA+ to AA on 11 September 2026, assigning a stable outlook.^[1] The agency cited weak budgetary performance driven by the state ramping up infrastructure spending ahead of the 2032 Brisbane Olympics as the reason for its decision to lower the rating. It is the first downgrade to Queensland's rating since February 2009, when S&P cut it from AAA to AA+ during a large capital program and cyclical revenue decline.^[3]

A credit rating directly shapes the interest rate a government pays each time it borrows money through financial markets. Slipping a notch does not trigger an immediate crisis, but it lifts the cost of every new bond the state issues, compounding quietly across a borrowing program of this size.

What the numbers show

General Government Sector operating deficits reach $8.97 billion in 2025-26 and $8.85 billion in 2026-27, with fiscal deficits of $18.9 billion and $16.9 billion across those same two years.^[2] S&P's analysis points to recovery from 2027-28, which is the basis for the stable outlook rather than a further cut.

The overall debt load sitting behind those successive deficits is already substantial in scale. Non-financial Public Sector borrowings are forecast at $142.4 billion as at 30 June 2026, rising to $183.7 billion by 2027-28 and $202.1 billion by 2028-29, though S&P said Queensland's debt remains lower than most other Australian states.^[2]

Janetzki versus Chalmers

Queensland Treasurer David Janetzki was direct about what the government would not do. "S&P wanted us to raise taxes, reduce services and stop building, and that is not going to happen," Janetzki said.^[1] That firm position clearly rules out all three main levers a rating agency typically looks for when fiscal deficits are this wide.

Federal Treasurer Jim Chalmers stepped away from any shared responsibility. "The Queensland budget is not under pressure because of the Commonwealth," Chalmers said.^[1] The exchange between the two treasurers sets up a broader funding argument that will likely sharpen further as Olympic construction spending accelerates over the next three years.

Where Queensland sits now

Before this downgrade, Queensland held an AA+/Stable rating alongside New South Wales. Victoria carried an AA/Stable rating.^[4] Queensland now shares Victoria's AA level, leaving New South Wales as the only mainland state rated AA+ by S&P Global.

S&P's stable outlook means the agency currently does not expect another rating cut in the near term, provided the state's deficits narrow as the Queensland budget forecasts from 2027-28 onward.^[2] The Queensland government's next detailed budget update will provide the clearest practical test of whether that forecast recovery path is holding.

Fiona Sterling

Fiona Sterling writes about superannuation, tax and personal finance. She takes rules that are written to be confusing and explains what they mean for the money in your account.