Victoria’s credit rating downgraded

One of two main international credit ratings agencies has downgraded its view of Victoria’s credit-worthiness, saying the state’s ‘substantial and prolonged lockdown’ had left it in more fiscal trouble than the rest of Australia.

Ratings agency Standard & Poor’s downgraded Victoria from AAA rating to AA, taking the state’s rating down two notches.

NSW was also downgraded by one level from AAA to AA+ on Monday, with the two states the first Australian jurisdictions to be downgraded since the economic shock of the pandemic hit.

In the wake of the state government’s big spending budget last year, fuelled by a borrowing program that is set to take net debt to nearly $155 billion in the next four years, S&P, and the other big ratings agency Moodys, flagged that they would be reviewing their advice to investors on Victoria.

In its briefing note issued on Monday, S&P said it believed the state was going to run big deficits for years to come and it had largely run out of assets to sell to help prop up its budget position.

“Victoria’s economy has been affected more significantly than other Australian states and territories, mainly because fallout from the second wave of infections resulted in a substantial and prolonged lockdown,” S&P wrote.

“In our view, the Victorian government’s path to fiscal repair will be more challenging and prolonged than other states because of the significant increase in debt stock projected over the next few years.”

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