Fresh from its placement of NSW on negative ratings watch, Standard & Poor’s has revised its outlook on Western Australia to negative from stable:
SYDNEY (Standard & Poor’s) Oct. 25, 2012–On Oct 25, 2012, Standard & Poor’s Rating Services revised its outlook on the State of Western Australia (WA) to negative from stable. The outlook revision reflected our expectation that WA may experience weakened budgetary performance as a result of lower mining royalties and the time-lag before Australia’s framework of horizontal fiscal equalisation between the Australian states and territories adjusts to reflect WA’s lower fiscal capacity and the downside risk to revenues.
It appears the terms-of-trade feedback loop that I warned about in September might be coming home to roost!
Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
