How Credit Ratings Work in Western Australia

Credit rating assessments are undertaken by private sector organisations who advise investors of the level of financial risk associated with an entity, including governments. Western Australia is currently assessed on an annual basis by two credit rating agencies, Moody’s Investors Services (Moody’s), and Standard and Poor’s.

Western Australia was upgraded to triple-A (Aaa) by Moody’s in December 1996, following a downgrade to Aa1 in January 1992. Standard and Poor’s upgraded the State to triple-A (AAA) in December 1998 following the downgrade to AA+ that occurred in October 1991.

For the State of Western Australia, a triple-A credit rating provides an easily identifiable signal to the public and potential investors that the Government is managing the State’s finances and economy in a responsible way, and that in terms of risk, the State represents a stable investment destination.

In a stable financial environment, a high credit rating also means lower borrowing costs for the State, reflecting the lower risk premium demanded by lenders.

Assessment Methodology

The ratings agencies use a range of factors in their annual ratings assessment. In this regard, Standard and Poor’s utilise around 22 different financial ratios, and an unspecified number of economic factors, in assessing jurisdictions. Similarly, Moody’s utilise around 35 different indicators of both a financial and economic nature in their assessments.

It should be noted that particular issues affecting Western Australia’s assessment may not be as important or critical for another jurisdiction, reflecting different circumstances between jurisdictions, the structure of their finances, performance of the local economy, etc.

For further information go to:

• Standards and Poor’s Australia Ratings 
• Moody’s Research and Ratings