Western Australia (WA) has been stripped of its AAA credit rating by global ratings agency Standard & Poor's, local media reported Wednesday.
WA's long-term issuer credit rating is now AA+, but its short- term issuer credit rating of A-1+ has been affirmed.
Standard & Poor's said the downgrade was a result of declining revenues and a blowout in the state's debt.
"WA's debt burden is now at the high end of the domestic peer group, and in our view is likely to continue rising," it said.
The state's debt is predicted to rise to almost 22 billion AU dollars (20.6 billion U.S. dollars) in the 2013-14 financial year but it will jump to more than 28 billion AU dollars by the 2016-17 financial year.
WA Premier Colin Barnett said he was disappointed at the state' s loss of the AAA rating.
"Debt is high and is rising. Why? Because this state is growing, " he told reporters.
"We're investing in hospitals, in schools, in improving our capital city, road projects, regional development and the like, and I don't apologize for that."
Standard & Poor's said it didn't anticipate a return to WA's AAA rating within the next two years.