Research Update: Australian State Of Victoria Rating Lowered To 'AA' On Structurally Weaker Fiscal Outlook; Outlook Stable

Victoria is responding to a large pandemic-related economic and fiscal shock with significant fiscal stimulatory initiatives beyond what we previously factored into our rating. The state's operating and after-capital account deficits and debt burden have deteriorated sharply, with debt reaching about 200% of operating revenues in 2023 from 70% last year. They are likely to remain high by domestic and international comparison. As a result, we are lowering our long-term rating on Victoria to 'AA' from 'AAA' and removing it from CreditWatch negative. The outlook is stable. While the government's second lockdown suppressed the spread of COVID-19 and averted what could have been a more significant impact on the state's economy, it led to a more significant effect on the

...- Victoria is responding to a large pandemic-related economic and fiscal shock with significant fiscal stimulatory initiatives beyond what we previously factored into our rating. - The state's operating and after-capital account deficits and debt burden have deteriorated sharply, with debt reaching about 200% of operating revenues in 2023 from 70% last year. They are likely to remain high by domestic and international comparison. - As a result, we are lowering our long-term rating on Victoria to '##' from '###' and removing it from CreditWatch negative. The outlook is stable. - While the government's second lockdown suppressed the spread of COVID-19 and averted what could have been a more significant impact on the state's economy, it led to a more significant effect on the state's fiscal outcomes than in other states. Economic recovery will be supported by the government's spending initiatives. Our ratings on Victoria are supported by its wealthy and diversified economy, strong financial...

Research Update