The rating on the Australian State of Victoria reflects our view of the extremely predictable and supportive institutional framework benefiting state governments in Australia, plus the state's very strong financial management and economy, and its exceptional liquidity. The ratings also reflect Victoria's strong budgetary performance and low contingent liabilities. Victoria's average budgetary flexibility and its moderate debt burden partially offset these strengths. Australia's institutional framework underpins the ratings on Victoria. The institutional framework governs the relationship between the Commonwealth government and the states and territories, and we consider it to be extremely predictable and supportive, and one of the strongest in the world. Within this system, however, there is a degree of structural imbalance between revenue powers and expenditure responsibilities.
