The State of Victoria's credit profile 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 very low contingent liabilities. The state's average budgetary flexibility and moderate debt burden partially offset these strengths. The negative outlook reflects that on the Commonwealth of Australia because we don't consider that any state or territory in Australia, including Victoria (stand-alone credit profile 'aaa'), can maintain stronger credit characteristics than the sovereign in a stress scenario. This is because of the revenue raising and expenditure responsibility arrangements between the states and the sovereign. We think that
