Fitch Affirms Queensland's Ratings; Outlook Stable.

Business Editors

NEW YORK & LONDON & BRISBANE---(BUSINESS WIRE)--Jan. 14, 2003

Fitch Ratings, the international rating agency, has affirmed the State of Queensland's Long- and Short-term local currency ratings of 'AAA' and 'F1+', respectively. The 'AA' Long-term and 'F1+' Short-term foreign currency ratings are also affirmed and the Rating Outlook remains Stable. The ratings are based on Queensland's sound economic fabric and net debt position, with liquid investments exceeding indebtedness. Nevertheless, Fitch expects the administration to meet its forecast of a reduction in the overall deficit, after capital expenditure, and to be in surplus by 2006. The policy commitment to maintain an overall operating surplus should lead to continued strong fiscal and financial discipline.

Queensland has consistently recorded stronger annual economic growth than Australia as a whole and has narrowed its historical GDP gap with the rest of the country, with some sectors being particularly dynamic. Traditionally, Queensland has had a greater focus on mining and agriculture than the rest of Australia. Nevertheless, its main sector is services, and this is underpinned by tourism and related activities. Although declining, Queensland's unemployment rate remains higher than the national figure, in part for demographic reasons.

Traditionally, Queensland has achieved good fiscal performance, demonstrated by its sound operating surpluses and high level of internally funded capital expenditure. Nevertheless, the current balance has been declining in the past three years and the downward trend can be attributed to two main factors -- the liability of the state for the collapse of HIH Insurance (impacting 2001 results) and negative returns on its financial assets (2002). Queensland is the only Australian state to have fully funded its accrued liabilities, such as its superannuation scheme, and holds a diversified portfolio, including equities, to meet these liabilities. The state's major functional areas of operating expenditure are education and health, but the wider public sector includes a number of Public Trading Enterprises (PTE) that are involved in areas such as energy and rail. These entities provide dividend and tax equivalent payments, but also receive transfers from the state.

The debt level of the General Government is low in relation to current revenue, but this increases considerably when the indebtedness of the PTEs is included. However, because investment exceeds liabilities, Queensland reports a negative net debt situation. The state also guarantees the liabilities of its Treasury Corporation, which acts as a finance vehicle not only for the state and the PTEs but also for the local governments in Queensland. Therefore the contingent liability from the Treasury Corporation is sizeable.

One of the six Australian states, Queensland has the second largest land area and with a population of around 3.7 million it is third largest by this measure in the country.