What Victoria’s AAA credit rating loss means

Victorian has lost its AAA credit rating, with the state’s rating falling two notches to AA as the economic toll of the COVID-19 pandemic hits.

It’s the first time since 2003 that the state has not been issued a AAA rating.

Senior economics correspondent for The Age, Shane Wright, says it means rating agencies believe there is “a small smidgen of a chance” that Victoria won’t repay the debt it is taking on.

“Is it a big deal? Well that’s, in Victoria’s case, the $150 billion question,” he told Stephen Quartermain and Tony Leonard, filling in for Ross and Russel.

“Australia is one of only two or three countries in the world ever to not have paid back its debt.”

Mr Wright says the rating change should, in theory, mean an increase in the interest rate on Victorian debt.

“If you’re going to buy government debt, the interest rates on those are governed largely by these credit rating, so effectively there should be a little bit of an increase on Victoria’s debt,” he said.

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