Senior Ontario cabinet ministers on Thursday downplayed a decision by Moody's Investors Service to change Ontario's debt outlook from stable to negative, but the Opposition warned an expensive credit downgrade could soon follow.

Moody announced the change in the province's outlook Wednesday, while affirming Ontario's As2 credit rating, citing concerns over the Liberal government's ability to eliminate a $12.5 billion deficit by 2017-18 as scheduled.

"After several years of weak to moderate economic growth, and higher than previously anticipated deficits projected for the next two years, the province is facing a greater challenge to return to balanced outcomes than previously anticipated," the ratings agency said in a statement.

"The required revenue growth ... and necessary operating expense control to achieve fiscal targets will require a considerable shift from recent trends."

'The bankers aren't freaking here' Sousa says

Finance Minister Charles Sousa said the Liberals have taken steps to control spending and are looking for more savings in the system, and claimed the rating agencies and the banks that loan the government money aren't worried about its massive debt load.

"The bankers aren't freaking here," Sousa told reporters. "What has happened is the degree of revenue has not met expectations, that's really the issue."

But the Opposition said the move by Moody's was entirely predictable because the Liberals have said the July 14 budget will be identical to the May 1 budget that triggered the June election campaign, a plan the agency called a "credit negative."

'Somebody is freaking' says Fedeli

"The signal from Moody's that they've downgraded their outlook, somebody is freaking," said Progressive Conservative finance critic Vic Fedeli. "I think one of the first things Minister Sousa needs to do is acknowledge there is a problem."

Credit ratings agencies waited until after the June 12 election before commenting on the budget, which contained $5.7 billion in new spending, as a "courtesy" to avoid interfering in the campaign, added Fedeli.

"There's a deteriorating financial position in Ontario and it's recognized now by the agencies," he said. "You can't continue to spend and reduce the deficit at the same time, it's just physically impossible to do both, yet they claim to be doing both."

Treasury Board president Deb Matthews, who has been given expanded powers to find hundreds of millions of dollars in more savings, followed Sousa's lead in suggesting the negative outlook from Moody's wasn't that important.

"I wouldn't say I'm worried about it," said Matthews. "Clearly there's a challenge, but we know there's a challenge and that's why we've created this new position as president of the Treasury Board to focus on this challenge."

The Liberals insist they will not eliminate civil service jobs to balance the budget, which Sousa said can be done on schedule without taking "extreme measures" or by cancelling planned spending on transit, infrastructure and job creation.

Eleven billion dollars a year in interest charges on nearly $290 billion of debt is already the third largest expenditure in the Ontario budget, behind health care and education, and would go even higher if the province's credit rating is downgraded.

The negative outlook from Moody's will be followed by a credit downgrade not only for the province, but for municipalities, electricity utilities, universities and other agencies funded by the government, predicted Fedeli.

"The biggest concern is it will take away money that could be spent on services," he said.

Moody's didn't wait for the newly re-elected government to introduce its budget July 14 before changing its outlook to negative, saying the fiscal plan will be the same as the one introduced in May that it called a "credit negative" for Ontario.