Weekend Edition: Is there too much state debt?

NAB Morning Call

Friday 16th August 2024

Please note this communication is not a research report and has not been prepared by NAB Research analysts. Read the full disclaimer here.

A report last week from S&P Global highlights that the debt held by Australian states could exceed $600 billion later this year. Rebecca Hrvatin joins Phil to discuss this rise in debt and what it’s doing to credit ratings. Overspend on infrastructure projects seem to be one of the major concerns.

But there’s no shortage of buyers according to Ken Crompton. Ken is senior fixed income strategist at NAB and a regular on The Morning Call. He says, ironically, greater debt will be attractive to overseas investors who might previously have been put off by the limited availability of Australian state debt.

The issue going forward is not how much debt is being carried, but how effectively it’s being managed. Massive project overspends are part of the problem and interest payments are becoming an increasing proportion of state governments’ expenditure.

Phil asks whether green bonds could restore some balance and attract even more foreign buyers.

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