The ratings on the State of Victoria reflect the strong institutional framework for state governments in Australia, as well as Victoria's wealthy and diversified economy, and its very capable and conservative financial management. These strengths are partially offset--as with all Australian states--by relatively moderate revenue and expenditure flexibility. We consider the institutional framework in Australia, which governs the relationship between the Commonwealth government (Commonwealth of Australia, unsolicited AAA/Stable/A-1+) and the states and territories, to be predictable and supportive, and one of the strongest in the world. Within this system, however, there is a degree of structure imbalance between revenue powers and expenditure responsibilities which moderates Victoria's budgetary flexibility. The bulk of revenues raised in Australia are by the Commonwealth, while
