Western Australian Treasurer Mike Nahan has ruled out raising taxes or taking on further substantial spending cuts, after a global credit agency warned its key credit rating was again under threat of being downgraded.
Standard and Poor's placed the long-term AA+ rating on negative watch on Tuesday and warned WA had to take action to offset the threat to the budget position from slumping mining royalties.
Dr Nahan said S&P had some of the data wrong and was overestimating what was needed to help the state's economy recovery.
The government would not be adopting S&P recommendations which amounted to raising state taxes by 25 per cent and cut spending by $2.8 billion on top of existing saving measures.
"They're looking at the numbers rather than the broader economy," Dr Nahan told reporters.
"We're going to take on a bit of water but we're going to get through this."
Asked about S&P's comment that the conservative WA government lacked the "political will" to make difficult decisions, Dr Nahan said the agency should "watch and read" the next state budget in May.
S&P's stance on WA comes after it cut iron ore price expectations to an average of $US45 a tonne, from $US65, for this rest of this year. The ratings decision is expected to be finalised within 90 days.
WA opposition treasury spokesman Ben Wyatt said the rating action highlighted the lack of a coherent and consistent financial plan from the Barnett Liberal government.
"If you have no financial plan, this is where you end up - record debt, record deficits and credit rating downgrades," Mr Wyatt said.
But this is a fresh blow for WA, after the federal Grants Commission recommended the state receive back less than 30 cents in every dollar it pays in GST in 2015/16.
Prime Minister Tony Abbott and Treasurer Joe Hockey are sympathetic to WA's plight, but neither are holding out hope of federal intervention.
Dr Nahan said S&P putting all of the iron ore exporters on watch on the same day as WA illustrated how highly dependent the state was on the commodity and that the GST system was bust.
"The idea that we shouldn't be reliant on iron ore is ridiculous," he said.
"Allow more of our tax that we currently pay to come back to us to meet the clear commitments and loss of royalty revenue."
When the WA government released its mid-year budget update in December, it flagged a deficit of $1.3 billion for 2014/15, against an earlier projected surplus of $175 million.
Now S&P says if "significant" measures aren't taken in the 2015/16 budget, WA faces operating deficits over 2014 to 2018.
S&P cut WA's top tier AAA credit rating to AA+ in late 2013.
Almost a year later the state shed the Aaa rating assigned by rival agency Moody's, which downgraded it Aa1.
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