Following its earlier downgrade of the federal government’s AAA-credit rating to negative watch, S&P has dished-out the same treatment to NSW, VIC and the ACT. From The Australian:
“We cap our long-term rating, and hence the outlook, on the Australian states and territories of NSW, Victoria and the ACT at the level of the long-term rating on the Commonwealth because we don’t consider that any state or territory in Australia can maintain stronger credit characteristics than the sovereign in a stress scenario,” S&P credit analyst Anthony Walker said.
“This is because of the revenue-raising and expenditure responsibility arrangements between the states and the Commonwealth, where taxation powers are concentrated at the Commonwealth, while the states are responsible for the delivery of health and education services.”
Fair enough. I will also add that NSW and VIC are heavily reliant on volatile stamp duty revenues, which are currently riding the bubble. When the housing market inevitably turns, then revenues will fall heavily.
