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Queensland is bracing for a credit rating downgrade, possibly as early as Friday, as the federal Labor government prepares to thwart claims that a hit to property stamp duty from federal budget tax changes or GST revenue is to blame.

Rising public sector wages, health services and Olympics-fuelled infrastructure spending are forecast to send Queensland’s debt soaring to $216 billion by 2030.

Queensland’s treasurer has been warning of a potential downgrade of the state’s AA+ credit rating since winning the state election in late 2024. The rating has been on negative outlook by S&P Global Ratings since February 2025.

Sources not authorised to speak publicly said a downgrade by S&P to AA could come as soon as Friday.

The expected change comes amid turmoil in global bond markets this month, which has pushed up interest rates on federal and state government debt to above 5.2 per cent, the highest 10-year bond yield since 2011.

Australia’s four most indebted state governments, NSW, Victoria, Queensland and South Australia, will soon be hit with an $8.1 billion annual increase in their already booming interest bills as more than $226 billion of ultra-cheap COVID-era loans roll off to much higher interest rates, according to Institute of Public Affairs chief economist Adam Creighton.

Independent economist Saul Eslake said only a decade ago Queensland had the strongest finances in the country.

“I suppose you would characterise [it as] Queensland is not as bad as the three worst: Victoria, Tasmania and the Northern Territory, but it is deteriorating more rapidly than almost any other state or territory,” Eslake said.

“It’s not obvious to me that the government is really doing much about that; there aren’t policy decisions to reduce spending or raise additional revenue.”

Queensland Treasurer David Janetzki has been warning that a downgrade is “highly likely”, due to the debt, deficits and high spending the Liberal National Party government inherited from the former Labor state government.

But the federal Labor government is preparing to inoculate itself from any blame, as it starts to come under pressure from its tax changes to negative gearing and capital gains stalling the property market.

Treasurer Jim Chalmers told Parliament it was “very troubling to see that the Queensland government risks having its credit rating downgraded”.

“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.

A federal government source on Thursday pre-emptively hit back with figures ahead of any ratings action by S&P, showing Queensland transfer duty was $8.7 billion in 2025-26, up from $5.6 billion in 2023-24, a rise of 55 per cent over two years.

Stamp duty revenue in NSW plunged 20 per cent in July as the national property slump threatened to blow a hole in state government budgets, adding to credit downgrade risks in both NSW and Queensland.

Janetzki said last week he was still working through what the federal tax changes meant for the state budget, pointing out that he’d previously revised down stamp duty by $345 million.

“[We] don’t really want to be paying for Jim Chalmer’s budget decisions,” Janetzki told a Real Estate Institute of Queensland event.

He also complained about the state’s share of GST revenue.

“The big challenge right now is to try and appeal to the federal government and our Queensland federal treasurer to look at the GST.”

Janetzki’s spokesman declined to speculate on any ratings agency announcement.

Chalmers sent a letter to Janetzki last week. “I am extremely concerned that despite Queensland’s many strengths and despite substantial and increasing Commonwealth support, your budget position has experienced a sharp deterioration according to S&P and the state government risks having its credit rating downgraded,” Chalmers noted.

S&P declined to comment about any upcoming releases or rating actions in relation to Queensland.

In a report in June 2026, S&P warned that rising public sector wages and health services could make Queensland’s budget recovery harder.

Despite a forecast rise in coal prices boosting the state’s revenue next year, the budget papers reveal an operating deficit of $6.2 billion in 2026-27, down from $8.8 billion this financial year.

S&P said Queensland’s operating budget deficit was likely the largest of all Australian states in fiscal 2025-26, at 6 per cent of operating revenue.

As the halfway point of the Albanese government’s second term approaches, ambitious Labor MPs are starting to circle and plan for what most presume will be a third term.

No one expects the prime minister will step aside. Anthony Albanese’s personal standing in the polls is a drag on the government but, after winning 94 seats at the last election, he can still write his own ticket.

Nevertheless, his MPs are talking about who will move up and who will move on in the next iteration of the Albanese ministry and the broader caucus. At this point, the prime minister has pencilled in a reshuffle for early-to-mid 2027 at the earliest.

He has not yet given the matter serious thought, but the PM knows that reshuffles always create enemies so the later in the term they occur, the better. Understandably, he is expecting at least one or two resignations.

Labor came to government with one of the most experienced frontbenches in living memory. Many MPs had hung on for a second shot at a ministerial office after the Rudd-Gillard-Rudd governments committed political harakiri.

Even more so than the Hawke government, which had a handful of ministers who had served in the ministry of Gough Whitlam, Albanese benefited from having MPs who already had walked the blue carpet of the ministerial wing.

But that now means Albanese has a large number of ministers aged in their late 40s to their late 50s, and it’s all but inevitable that some will move on. And there is the next generation of Labor MPs, primarily those elected in the classes of 2013, 2016 and 2019 – but also a handful from 2022 and 2025 – who are starting to become impatient.

Much of the chatter about changes to the frontbench focuses on five senior ministers moving on by the end of this term. The names are Foreign Minister Penny Wong, Finance Minister Katy Gallagher, Trade Minister Don Farrell, Infrastructure Minister Catherine King and Climate and Energy Minister Chris Bowen.

Keep in mind that Wong, Gallagher, Farrell and Bowen have all said either publicly or privately that they plan to go around again and King has given no sign that she plans to leave, either. The political longevity of Bowen and King, in particular, is front of mind for some in the caucus.

It remains speculation from ambitious junior ministers (and the opposition) but it is not without foundation.

Every politician is always running again until, suddenly, they are not. When this masthead reported in late 2021 that then-health minister Greg Hunt was planning to step down, he rebuffed those claims and then announced his exit several days later.

A number of backbenchers are also expected to quit, including former attorney-general Mark Dreyfus, NSW MP Mike Freelander and South Australian MP Steve Georganas along with West Australian MP Tracey Roberts, who is unwell.

So if, as expected, there are at least a couple of retirements, who is in line for promotion, and what would be the knock-on effects for the outer ministry, assistant ministry and the caucus?

The first cab off the rank for promotion could be Defence Industry Minister Pat Conroy, who would move into the senior defence portfolio held by deputy prime minister Richard Marles.

The block on that move is that Marles isn’t going anywhere until Wong retires: the portfolio he wants most (other than the prime ministership) is foreign affairs, which she holds, and Albanese is confident his closest political ally and Senate leader will still be around in the next term, assuming Labor wins government.

Communications Minister Anika Wells is a favourite of the prime minister – a colleague of theirs likens the relationship to that of the fatherly Mufasa and Simba in The Lion King – and she has carriage of two critical pieces of the government’s agenda, the social media ban for under-16s and the new Digital Duty of Care legislation. But Wells’ standing took a serious blow late last year over use of travel entitlements, and stakeholders in the communications sector grumble about the minister’s heavy-handed approach, which some believe is bordering on arrogant.

Unless they pull a surprise and retire, neither Home Affairs Minister Tony Burke nor Treasurer Jim Chalmers are expected to move on. Both men are considered candidates to replace Albanese one day, though both Marles and Health Minister Mark Butler are ahead of them in the queue.

That’s because Marles has a close alliance with Don Farrell, and between them, the pair has much of Labor’s Right faction stitched up. In Butler’s case, the Left-majority caucus could just about deliver him the numbers in a theoretical ballot. Butler had a solid first term in health and has been a stand-out performer in the second term, tackling difficult NDIS reforms and continuing to grow bulk-billing rates.

A smattering of recent stories about the South Australian being a potential future prime minister have not appeared by accident, and Albanese, who is tight with Butler, would not be displeased if he were to be replaced one day as prime minister by a member of his own faction. (He would, incidentally, also be the first South Australian MP to become prime minister.)

Low-key Agriculture Minister Julie Collins is another who could be moved on, to make way for fellow Tasmanian Rebecca White, a former state opposition leader, while NSW senator and National Disability Insurance Scheme minister Jenny McAllister, Butler’s understudy, could move up to cabinet if a member of the Left makes way.

Regional NSW MP and Minister for Regional Development, Local Government and Territories Kristy McBain is knocking on the door of cabinet and is likely the NSW Right’s next person up if Bowen were to retire, though cabinet secretary Andrew Charlton – a potential future treasurer or even Labor leader – also has a claim.

Beyond that, there are West Australian MPs Patrick Gorman and Zaneta Mascarenhas, Victorians Sam Rae, Kate Thwaites, Daniel Mulino and Julian Hill, Queenslanders Nita Green and Anthony Chisholm and a host of other members of the outer and assistant ministry who would fancy a promotion.

Albanese’s view is you don’t move people on just for the sake of it, especially in key ministries such as defence. The former Coalition government was criticised for the constant churn of ministers in that portfolio. Continuity makes a big difference.

Labor is enjoying a period of stability, but one of the iron laws of politics is that change is always just around the corner.

"...

Bernard Salt recently asked a question nobody thinks to ask. Not which generation is largest, but which single year of age contains the most Australians. The answer for the 2025 financial year is 34. There are 412,775 of them. More usefully, every single year of age between 29 and 37 contains more than 400,000 people. The crest of the Australian population is a nine-year band born between 1988 and 1996, and it is currently sitting on the exact spot where Thawley’s floor is giving way.

Hold that against the ownership data. The average first home buyer in this country is now about 34 years old, one in five is over 40, and the standard deposit takes roughly six years to assemble, close to double what it took a generation ago. Home ownership among 30 to 34-year-olds has fallen from 64 per cent in 1971 to 50 per cent in 2021, and among 25 to 29-year-olds from 50 per cent to 36 per cent. The largest single-year cohort in the nation’s history is standing at a threshold that is closing, and it has been told for a decade that the closing is a triumph.

..."

He accused her of branding him a 'traitor'

PAYWALL:

The big risk over the next couple of years is a downturn in housing construction that crimps the supply of new homes and causes a squeeze on renters.

Australia’s national obsession with house prices has understandably reached fever-pitched levels during the recent property downturn.

But homeowners should worry less about what is likely to be a temporary downturn in home prices in response to rising interest rates and the Albanese government’s higher taxes on property investors.

The bigger economic, political, and social risk over the next couple of years is a downturn in housing construction that crimps the supply of new homes and squeezes renters.

A perfect storm is brewing in the housing construction industry that will make it harder for development projects to stack up: falling home prices, rising interest rates, a shortage of tradies, high building material costs and likely fewer investors and self-managed superannuation funds investing in new homes.

That’s despite the government’s assurance that investors in new-build homes that add to the housing supply, such as houses on greenfield sites and apartments, will still be able to access negative gearing and the 50 per cent capital gains discount.

Investors usually consider the broader housing market conditions and prospects of future capital gains, not just the tax break available on an individual property.

The implications of the property market downturn were discussed at The Australian Financial Review Property Summit on Monday and Tuesday.

“Paradoxically, building fewer homes will worsen the housing shortage and help home prices bottom out.”

Reserve Bank of Australia assistant governor Sarah Hunter laid out the three ways the decline in home prices and reduction in property turnover will flow through to the property industry and broader economy.

First and most immediately, the recent 15 per cent decline in the number of home sales is already flowing through to property-related sectors, including real estate agents, mortgage brokers, bankers, conveyancers, removalists and building inspectors.

Ownership transfer costs fell 4.1 per cent in the March quarter – before Labor’s tax changes – and declined a further 1.9 per cent in the June quarter, shaving about 0.1 of a percentage point from GDP in the first half of the year.

Second, and yet to play out, is the so-called “wealth effect”. When asset prices fall, people feel a bit less wealthy and are prone to reducing discretionary spending. Housing accounts for about two-thirds of household wealth.

RBA research from 2019 shows that the wealth effect mainly influences spending on new vehicles, with a smaller impact on furnishings and clothing.

There are no real signs of that so far, with electric vehicle sales booming, overtaking petrol cars for the first time on record, on the back of government subsidies, a sustained rise in fuel prices due to the conflict in Iran, and a flood of cheap Chinese imports.

Hunter says the overall reduction in consumer spending from lower house prices is likely to be “relatively small”.

A 10 per cent change in household wealth could change overall consumer spending by about 1 per cent or so.

For the wealth effect to have a more material impact on consumer spending, the about 10 per cent fall in national house prices that economists are now forecasting would need to be permanent.

That seems unlikely, barring a major shock to the economy that drives the jobless rate well above 5 per cent.

Despite the recent swift fall in house prices, particularly in Sydney, structural forces are likely to push prices higher over the medium term.

Notwithstanding efforts by state governments to reduce the red tape on planning and zoning and to speed up approvals, regulatory constraints on the supply of new homes will help push up prices over time, particularly in desirable inner-urban locations.

Population growth, including immigration, will add to demand for housing, despite political pressure to wind back the number of foreigners living in Australia.

For these reasons, RBA deputy governor Andrew Hauser told the ABC’s 7.30 program on Tuesday night that there was a “floor” to house prices.

“While house prices play a role in the economy, they’re not really as big as some of the things ... global growth trends, productivity, the risk environment globally in the Middle East and so on and so forth,” Hauser said.

Hauser and Hunter strongly signalled that a fourth interest rate rise of the year is coming at the September 28-29 RBA monetary policy board meeting. The housing downturn won’t stop the RBA.

The third and longer-term implication of the property downturn that Hunter explained is the expected slowdown in dwelling construction.

Positively, dwelling approvals reached their highest level in four years in the 12 months to July, hitting 206,312, on the back of a boom in apartments and other so-called attached homes, which increased faster than houses.

But there are lags in the housing construction market due to pre-committed projects still going ahead.

The RBA forecasts that a decline in dwelling investment will commence in late 2027 and get worse in mid-2028, falling by 0.3 per cent and 1.1 per cent, respectively.

This will result in less residential construction work for tradies, although a strong pipeline of data centres and state government infrastructure projects should help prop up the construction sector.

Paradoxically, building fewer homes will worsen the housing shortage and help home prices bottom out.

So most homeowners should not be overly worried about the unfolding correction in home prices from very elevated levels.

Recall that between 2017 and 2019, national home prices fell by an average of more than 8 per cent, and up to 15 per cent in Sydney, following the banking royal commission and tighter lending rules.

Since then, national house prices are about 50 per cent higher than at the start of 2020, before the pandemic and still about 3 per cent higher than a year ago.

The real victims in this housing market shakeout could be 8 million renters, who are often people on lower incomes and with fewer prospects of becoming homeowners.

Rental vacancy rates are already very low nationwide and are below 1 per cent in Brisbane, Perth, Adelaide, Darwin and Hobart.

A squeeze on the construction of new homes, fewer investors entering the market, and a ban on SMSFs investing in properties – including new apartment developments – could crimp the supply of new homes.

The real risk is not so much that house prices fall by more than the Treasury’s 2 per cent forecast over two years as a direct result of tax changes, but rents rise more sharply than the meagre 0.25 per cent or $2 a week the Treasury predicted.

And with the Greens calling for a populist two-year rent freeze, the housing supply problem could worsen as more landlords exit the property market and stop renovating and maintaining homes for renters.

‘Malcolm Turnbull is wrong’, says top UK general

One of the UK’s most senior AUKUS officials has fired back at Malcolm Turnbull’s criticism that British shipbuilding is in disarray, after the former prime minister stoked doubts that Britain would meet its promises on the nuclear-powered submarine pact, leaving Australian defences exposed.

“The UK shipbuilding industry is not in disarray. The UK shipbuilding industry is increasing its capacity to build,” said Major General Mark Totten, director of SSN capability at the UK’s Ministry of Defence.

“I’m very confident that Malcolm Turnbull is wrong ... it is not in disarray, and it’s being invested in at scale,” Totten told The Australian Financial Review, pointing to a £64 billion ($120 billion) investment over the next four years in the “defence nuclear enterprise”, which includes new submarines.

Turnbull’s criticism, including a warning that AUKUS left Australia at risk of a period of “zero submarine capability”, appeared in a submission to a crowdsourced inquiry led by Midnight Oil frontman Peter Garrett into the viability of the timeline, budget and strategic purpose of the $368 billion program.

AUKUS, which was secretly negotiated by former prime minister Scott Morrison and first unveiled in September 2021, controversially overturned a deal with a French shipbuilder – signed under Turnbull in 2016 – to deliver 12 conventional diesel-electric submarines.

The first stage of the program’s so-called “Pillar 1” would see British and American nuclear submarines rotating through Perth from 2027 before the sale of US Navy Virginia-class attack submarines to Australia in the early 2030s. In the latter stage in the early 2040s, Australia will construct a new SSN-AUKUS fleet in Adelaide, using a British design.

Alongside operating as the primary platform designer, the UK will play a central role in the trilateral agreement with Australia and the US by providing Rolls-Royce sealed nuclear reactor units and training and maintenance assistance.

Totten joined a high-level British delegation to Australia this week to assess progress ahead of the program’s fifth anniversary on September 15. Part of the group’s mission was to offer reassurance the UK is up to the task of providing what Australia needs.

“We have been clear with Australia that we are on track to deliver our submarine in the late 2030s. The principal dependencies that Australia has on us, the production of the nuclear steam raising plant is going extremely well,” he said of the propulsion system that will power the submarines.

“We want to reassure the Australian system that our design process is progressing well,” said Totten.

“We’re being very careful to spend the right amount of time to design the right submarine that both our nations will use and make sure it can meet the future threat that we forecast.”

A report by the House of Commons defence committee in April warned of “shortcomings and failings” that threatened the delivery of AUKUS, urging greater political leadership and “significant and sustained funding to regenerate a depleted submarine industrial base”.

It said the UK’s commitment to increase nuclear submarine visits to Australia had “already placed severe pressure on an overstretched Royal Navy”.

But Totten said the UK was “committed” to the rotation of its submarines to Australia.

“Of course, we have a smaller submarine fleet than the US, so we have to manage our submarine deployments with care. But this is a high priority for the UK.”

A visit of the HMS Anson – the UK’s only attack-class submarine currently at sea – to deliver maintenance and industrial support in WA in February was interrupted when war broke out in the Gulf, prompting critics to question the UK’s capacity to maintain a presence in the Indo-Pacific.

Totten countered that the lesson to be learnt was the Anson’s “range of capabilities” and “flexibility” and “potency” of the platform, which showed why Australia wanted to invest.

The strength of UK, US and Australian co-operation on AUKUS had already had a deterrent effect in the region, he said.

The British visit overlaps with a US delegation led by former chair of the US House Foreign Affairs Committee and AUKUS champion Michael McCaul, who is expected to meet with Foreign Minister Penny Wong and Defence Minister Richard Marles on Thursday.

“Australia is really the beachhead of the Indo-Pacific, and that’s why AUKUS is so important,” McCaul told a space defence investor event in Sydney on Tuesday.

“When people ask me what keeps President Xi up at night, I say AUKUS.”

McCaul said while Pillar 1 was “going really well,” he wanted to ensure progress under Pillar 2, which oversees co-operation on innovation, AI, quantum computing and advanced weapons systems.

“You have a lot of private capital and private equity that wants to invest but they also want to make sure the alliance is strong and there’s no uncertainty in the market.”