First, Queensland Treasury’s recommendation to aim for a gearing ratio of 70-75 per cent (up from 55 per cent) is counter to the AER’s 60 per cent benchmark and ignores the extremely wide range of gearing across the industry.
Second, the Queensland taxpayer is ultimately responsible for the debts of these businesses. That is exactly why the ratings agencies measure the debts of the whole government sector against a state’s revenue.
Third, it follows that the size of that debt burden matters, as Victoria and South Australia in the 90s and Greece today so clearly demonstrate, because when things go bad, and growth rates decline while interest rates rise, fiscal sustainability deteriorates sharply.
Fourth, by loading the networks up with max debt now, it reduces their capacity to fund future capex with retained earnings, meaning either more debt (but their capacity to borrow more will be reduced) or an equity injection from the state.
Still not content with a lazy $4.1bn from the GOC ATM, Treasurer Pitt set Treasury to work on finding even more idle cash.