International credit-rating agency Moody’s has downgraded Queensland’s credit rating due to its deteriorating finance and debt conditions.
The state’s rating has been dropped from AAA to AA1, but Moody’s says the outlook remains stable.
Queensland is the largest borrower out of any state, and has been hit by the downturn as its economy relies largely on the resources industry. Moody’s says the state’s borrowing practices did not coincide with its AAA rating.
“Significant reductions in coal royalties are now anticipated to contribute to weaker budget outcomes,” Moody’s says in a statement. “As a result, the state is expected to produce a series of very large, recurring deficits.”
Meanwhile, the Australian sharemarket opened lower today after negative leads from Wall Street due to the US Federal Reserve slashing its prediction for GDP growth in 2009.
The benchmark S&P/ASX200 index was down 19.1 points or 0.5% to 3805.5 at 12.07 AEST. The dollar opened at another seven-month high at US77.5 cents.
Commonwealth Bank shares dropped 2% to $35.49, with Westpac following by 1.9% to $19.31. AMP lost 2.3% to $5.20 while NAB lost 0.9% to $21.83.
Macquarie, the country’s largest investment bank, said it could change its employee share scheme after the Government introduced tax changes in the budget.
The Government announced that employees must pay tax upfront on shares in the year they are paid. Currently they can opt to wait to pay the tax.
The company said it will examine the changes announced in the budget and may well change how its own scheme is implemented. Macquarie is just one of many Australian companies examining changes to their schemes after the budget.
In the United States, the Dow Jones Industrial Average dropped 52.57 points or 0.62% to 8422.28.
The Obama Administration attempted to calm markets, with Treasury Secretary Timothy Geithner telling the Senate Banking Committee that the financial system is “starting to heal”.
“We still face a very challenging economic and financial environment, and we need to be careful to preserve substantial resources and flexibility to deal with future contingencies,” he said.
Computer manufacturer Hewlett-Packard announced it will make another 6400 staff cuts, bringing its global total to 31,000, but would not say how the decision would affect Australian workers.
“We are unable to discuss the local impact of the recent global workforce announcement,” a spokesperson told The Australian Financial Review. “Like many organisations, as part of our normal course of operations, each business and function will continue to evaluate their workforce to improve operational effectiveness.”
The company recorded a 17% drop in profit for the March quarter.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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