Queensland faces imminent credit rating downgrade amid spiralling debt

Queensland is on the brink of a credit rating downgrade, piling further pressure onto the state's spiralling multi-billion-dollar debt and interest costs.

The ABC understands a downgrade is imminent, sparking a blame game between Canberra and the LNP state government.

AMP chief economist Shane Oliver said a knock to Queensland's AA+ rating would see the cost of maintaining its ballooning debt increase.

"That means you've got less money left over to spend on other services or alternatively you've got to raise taxes or alternatively it just leads to a bigger budget deficit," he said.

"Neither of those outcomes are particularly attractive and that's where it impacts the average Queenslander because it could mean pressure for higher taxes or it could mean less in the way of government services."

Political finger pointing

Speaking in federal parliament, Federal Treasurer Jim Chalmers said the risk of a downgrade was "very troubling".

"As a Queenslander, I am concerned that despite substantial and increased Commonwealth support for Queensland, the Queensland government's fiscal position has experienced a sharp deterioration," he said.

Queensland treasurer David Janetzki, who has consistently said a downgrade was likely since coming to government in 2024, would not comment on any movement in the rating.

He laid the blame for any potential downgrade at the feet of the former Labor government and impacts from the latest federal budget.

"After a decade of fiscal vandalism under the former state Labor government which left Queensland on track for a credit rating downgrade, Queenslanders are now also paying the price for Jim Chalmers' budget decisions," Mr Janetzki said in a statement.

"Jim Chalmers confirmed on the floor of Parliament today what we have long been saying; that Canberra's continued cost-shifting onto the states has had a material impact on state budgets."

Mr Oliver said there were arguments to make for both the state and federal governments being to blame for the potential downgrade.

"At a high level, it's a result of economic circumstances," he said.

He said while the Queensland government had been making efforts to get back to a "more sustainable" financial position, that was being threatened by a fall in stamp duty revenue due to falling property prices and fewer sales of homes.

"The falling property market, rising bond yields, the GST carve up and not enough fiscal austerity at a state level all have a role to play in this likely downgrade," he said.

Debt forecast to march past $200 billion

Total debt is forecast to exceed more than $216 billion by 2029-30, an increase of 52 per cent over the next four years.

Handing down his most recent budget in July, Mr Janetzki had expected to bring the state's books back in the black by 2029-30.

A credit rating downgrade would cast doubt on that forecast.

Interest expenses for the current financial year are expected to reach $6.83 billion, and almost $11 billion by 2029-30.

That well exceeds the entire funding envelope for infrastructure for the 2032 Olympic and Paralympic Games, of $7.1 billion.

Credit agency S&P would not comment on any announcement or decision.