TASMANIA'S credit rating is at risk of being downgraded for the second time in 12 months, according to a quarterly report into the state's ailing economy.
A brief update on Tasmania's economic conditions and finances compiled by ANZ Economics, predicts a credit rating downgrade is "quite likely" due to growing debt, a weak economic outlook and restricted budgetary flexibility.
Ratings agency Moody's cut the state's credit rating to AA1 from AAA in October last year and any further downgrade would result in higher interest costs for the state government and businesses.
The state maintains a AA+ rating with Standard & Poor's, who stripped Western Australia of its AAA credit rating just last week.
Despite slight improvement in business confidence and the housing market stabilising, the state's high 8.6 per cent unemployment rate continues to climb - driving down consumer spending.
The ANZ pinpointed Tasmania's decreasing population growth, which is considerably behind all other states, as a major concern.
It used an indication on a mass exodus of young people to build a case for a future downgrade.
The big bank forecasts that by 2030 there will be 2.3 workers per retiree in the Apple Isle, compared with 3.7 in Western Australia and 3.1 in Victoria.
"Tasmania's public finances continued to worsen in the 2013-14 budget, with downward revisions to revenue, while expenditure was revised upwards as the government put in place policies to stimulate the struggling economy," the report said.
"Tasmania's economy has shown few signs of improvement, with output continuing to contract.
"Lower interest rates and the decline in the Australian dollar should provide some support to the economy, although weak population growth and an ageing population will continue to weigh."