Australian pension budgets leap to $93b

SYDNEY: Australian states' unfunded pension-plan liabilities surged 53 per cent to A$74.3 billion ($93 billion) last year, according to Rice Warner Actuaries.

New South Wales, Australia's most populous state, saw its unfunded pension liabilities jump 67 per cent to A$29.4 billion in 2009, the Sydney-based company said, citing an analysis of state budget figures.

"If the states want to keep their ratings, they need to have strong balance sheets and the ratings agencies look at unfunded liabilities," Rice Warner director Michael Rice said.

Moody's Investors Service said in August that Australian state and territory budgets may face downgrades as revenues decline and governments maintain or increase spending to stimulate their economies.

New South Wales holds a rating of AAA from Standard & Poor's, the highest grade, with a stable outlook. It isn't rated by Moody's.

New South Wales Treasury, the state's funding unit, had A$46.7 billion of bonds outstanding at June 30, according to its website. The yield on the state's 6 per cent bonds due 2020 dropped 15 basis points yesterday to 6.27 per cent, according to ANZ Group prices.

Treasurer Eric Roozendaal, decided in the budget to June 30, 2010, to increase pension contributions by 7.7 per cent a year instead of 3.5 per cent to meet a 2030 deadline to have liabilities fully funded.

- BLOOMBERG