Tasmanian budget is okay and the NSW budget is going to be

Both Moody's Investor Service and S&P affirmed their 'Aaa/AA+' credit ratings respectively, on the state of Tasmania with a stable outlook, following the release of the state budget on Thursday. Moody's noted that the state is facing budgetary challenges that are similar to other Australian states, as revenues slow significantly while spending remains at relatively high levels.

As part of its normal monitoring process, Moody's intends to conduct an in-depth analysis of the budget and its medium term impact on the state's financial and debt profile.

S&P said the ratings assigned to Tasmania were unaffected by the budget but warned that if net financial liabilities exceeded the 129 per cent of revenue predicted for 2010-11 or looked to be permanent, the ratings would be re-assessed.

Meanwhile, Fitch Ratings affirmed the 'AA+/Stable/F1+' ratings it assigns to the State of New South Wales, ahead of the release of the 2009-10 state budget tomorrow. Fitch said that while the state is still preparing its budget, the recent release of the Commonwealth of Australia's budget provides welcome budgetary relief to New South Wales and the other Australian states, effectively transferring the brunt of the projected state budgetary deficits to the central government.

The credit enhancement provided by this supportive system of intergovernmental transfers provides the state with budgetary flexibility to manage its expanded pipeline of capital expenditures, while also providing additional time for it to adjust its operating expense levels. This need to realign expenditures with a more sluggish revenue forecast is an important credit consideration.

However, another postponement of the state's infrastructure investment program, as occurred earlier this decade, would pose a long-term credit concern.  Deferment would add to project costs and potentially reduce the state's economic attractiveness, as well as its prospects for continued economic and tax base growth.