Ratings

Standard & Poor’s and Moody’s Investors Service rate the short term and long term currencies as follows:

Agency	Long Term Australian Currency	Long Term Foreign Currency	Short Term
Standard & Poor's	AAA/Stable	AAA/Stable	A1+
Moody's Investors Service	Aaa	Aaa	Prime-1

Full Reports

The following links are to the recent reviews of TCorp's rating (Full reports):

Moody's Investors Service Review, January 2008
Standard and Poor's Review, December 2007
Standard and Poor's Review, December 2006

 News Releases

The following links are to recent News Releases of TCorp's/NSW's rating:

Standard and Poor's News Release, June 2008

Extracts

The following are extracts of past reviews of TCorp’s rating:

Standard and Poor's Review, September 2005
Moody's Investors Service Review, January 2005
Standard and Poor's Review, November 2004
Moody’s Investors Service Review, January 2004
Standard and Poor’s Review, October 2003
Moody’s Investors Service Review, February 2003
Standard and Poor’s Review, December 2002
Standard & Poor’s Review, November 2002

Extract from Standard & Poor's Service review of New South Wales, September 2005

Extract from Moody’s Investor Service review of New South Wales , January 2005

 In its annual report on New South Wales , Moody's Investors Service says the Australian state's Aaa rating is supported by its sound fiscal policy and budgetary position, its modest debt burden, and the strength and diversity of the state economy.

 "The stable rating outlook reflects the state's strong fiscal record and modest debt burden, which affords it considerable financial flexibility.

 New South Wales retains a comparatively low debt burden as cash surpluses have been used to pay down debt since the mid-1990's. The low debt burden results in minimal interest payments, which comprise just 1.9% of revenues in the general government sector and 3.2% for the non-financial public sector.

 Over the medium term the debt burden is likely to rise given an expected widening in the deficits of state owned corporations and the general government sector. These budget gaps are likely to stem primarily from the infrastructure requirements of rail and water systems, but also due to pressures from rising wage costs and social services demands. However, given the currently very low debt levels, increases should be manageable.

 In addition the state's intention to reduce its combined general government sector debt and superannuation liabilities over the long-term should help contain its financial liabilities.

 New South Wales is 's largest state, with a diverse economic profile. The state capital, Sydney , is 's financial center and enjoys a greater share of property, business services, tourism, finance and communications activities. Economic growth has lagged the nation over the last three years, largely due to weak export performance, but an expected improvement in trade should result in stronger growth this year.

Extract from Standard & Poor's Review, November 2004

Underpinning New South Wales ’ ‘AAA’ rating is its strong balance sheet and the strength of general government finances. Increasing borrowings by the state’s trading enterprise to fund infrastructure partially weaken these strengths.

 "Combined net financial liabilities of the state and its trading enterprises is quite low. The ratio of these liabilities to revenue was 59% at June 30, 2004, compared with 84% at June 1998." Net financial liabilities is Standard & Poor’s broadest measure of liabilities and includes both net debt and superannuation liabilities.

 "Despite the budgeted regression into deficit of the general government sector this year, the general government balance sheet remains extremely strong. Eight successive cash surpluses have resulted in net debt falling to extremely low levels, and the government is comfortably on target to meet its goal of eliminating general government net debt by 2020. At June 30, 2005, net debt of the general government sector is forecast to be 8.9% of revenue, a substantial decrease from 36.5% at June 1998.

 Continuing high investment in infrastructure will pressure borrowings at the state’s trading enterprises, as they need to finance a large capital expenditure program. This will continue to offset the strong general government position regarding its effect on the state’s balance sheet.

Extract from Moody’s Investors Service Review, January 2004

New South Wales enjoys a comparatively high degree of fiscal flexibility.  Through prudent budgeting and better-than-anticipated revenue performance, the state has been able to maintain healthy budgetary surpluses.  As a result, its debt profile has continued to improve in recent years.

The state's debt burden should remain stable over the medium term … as modest increases in debt are expected to be offset by growth in revenues and in the economy. An easing in the housing market remain a risk to the economic outlook and consequently to fiscal prospects.  Nevertheless the state's ability to respond to these challenges is enhanced by its strong financial position, its generally conservative budget estimates, and buffers built into the budget. 

NSW retains modest debt levels compared with other Australian states and international counterparts. The stock of debt has declined since the mid-1990s—with the sole exception an increase in 1998/99 to reflect a one-time prepayment to the superannuation fund—due to the use of cash surpluses and proceeds of asset sales to pay down debt.  As a result, the debt burden of the non-financial public sector has fallen from 12.5% to 9.2% of GSP on a gross basis and from 8.9% to 5.6% on a net basis in the years from 1997/98 through 2002/03.  The low debt burden results in minimal interest payments, 2% of general government sector revenues, which significantly enhances budget flexibility. 

In addition to the A$24.7 million in gross debt of the non-financial public sector which is reflected in the above ratios the treasury corporation has issued an additional A$4 billion for debt management purposes.  NSW’s debt profile is favorable with debt being relatively long-term in nature compared to other states and the hedging of all foreign currency debt—25% of gross debt. 

Extract from Standard & Poor’s Review, October 2003

The state sits comfortably within the 'AAA' rating category.  Any change to the rating would require several years of much weaker financial outcomes than currently forecast, combined with government inaction in addressing fiscal problems.  Standard & Poor's views either of these scenarios as highly unlikely.

The ratings on the State of New South Wales are supported by:

• Its low levels of financial obligations...  NSW's net financial liability burden is a moderate 67.7% of operating revenue.  Current projections suggest that the net financial liability burden will remain about 60%-70% of operating revenue for the next few years;
  
• Strong ongoing fiscal performance.  The general government sector is expected to continue to record an operating surplus strong enough to fully fund all capital spending.  The consolidated state sector's fiscal deficit is due to the strong capital spending program of the PTEs, and so is consistent with the sate's 'AAA' rating, given the very strong balance sheet.
• A prudent fiscal strategy, to which the government remains committed.  Key fiscal targets include further reductions in general government debt, management of PTE debt, and management of the unfunded superannuation liability.  Compliance with the strategy and associated goals is likely to be consistent with the maintenance of the state's 'AAA' credit rating; and
  
• A strong and diverse economic base.  NSW is Australia's largest state economy and its capital city, Sydney, is Australia's finance and business capital.

NSW's financial performance has been very strong in the past few years.  Its general government sector has recorded large cash surpluses even after capital spending.  Some of its 'AAA' rated peers have tended to record deficits, but because these deficits arise as a result of capital spending prograams, this has not significantly negatively impacted credit quality.

NSW benefits from a strong economic base, which is comparable to its 'AAA' rated peers.  Although income per capita is not as strong as some other 'AAA' rated peers, this is partly compensated for by NSW's more dyanmic growth prospects.

The NSW government's medium-term fiscal strategy is prudent, and compliance with the strategy and associated goals is likley to be consistent with the maintenance of the state's 'AAA' credit rating.  A particular strength of the medium-term strategy is that it takes a wide-ranging approach to fiscal management.  As well as focusing on traditional measures of general government net debt, NSW considers PTE debt, nodebt actual liabilities, and contingent liabilities.

Standard & Poor's is confident that the government's commitment to the strategy is solid, and that the key targets will be met.  NSW is already on target to meet these goals, and based on current trends, may eradict underlying general government net debt well before 2020.  Indeed, even if its commimitment faltered, and debt stabilized rather than fall as projected, this would not necessarily lead to a change in the rating.  The general government sector's finances are currently well positioned to absorb a significant deterioration in the short term and still remain consistent with the 'AAA' rating.

Extract from Moody’s Investors Service Review, February 2003

New South Wales' Aaa long-term debt rating reflects the state's sound fiscal policy and budgetary position, its modest debt burden, and the strength and diversity of the state economy.
New South Wales is Australia's most populous and urban state, and it accounts for roughly one-third of the country's GDP. Its economic diversity mirrors that of the country as a whole, and growth usually tracks that of the national economy. Following a slowdown in the recent past spurred by sharp declines in construction activity, economic growth rebounded this year led by a strong housing sector and robust consumer spending.
New South Wales enjoys a comparatively high degree of fiscal flexibility. Through prudent budgeting and better-than-anticipated revenue performance, the state has been able to maintain healthy budgetary surpluses. As a result its debt profile has continued to improve in recent years.

Rating Outlook:

Extract from Standard & Poor’s Review, December 2002

The ratings of the New South Wales Treasury Corporation (TCorp) reflect the standing of its owner and guarantor, the State of New South Wales.

Despite the state government guarantee, the business and financial risks inherent in the management and operation of TCorp remain important influences on TCorp’s debt ratings. As TCorp manages all of the state’s (and almost all of its authorities’) debt and a significant proportion of its financial assets, an assessment of the operation of TCorp and its management of risk is an important component in Standard & Poor’s consideration of the state’s credit rating.

TCorp’s operations and risk management practices are considered by Standard & Poor’s to be consistent with the “AAA” rating on the state.

TCorp was established in 1983 to act as the central financing agency for the public sector of New South Wales (NSW). TCorp raises funds on behalf of the government and client authorities, on-lends these funds to clients, manages asset and liability mismatches, and provides a range of financial management advisory and investment services. Although client authorities have a choice of accepting or rejecting management advisory and investment services, all authorities within NSW (other than local governments) are required by legislation to borrow through TCorp.

Extract from Standard & Poor’s Review, November 2002

The ratings on the State of New South Wales (NSW) reflect its very low level of financial liabilities, strong ongoing budgetary performance, and a prudent approach to fiscal management.

NSW's net debt burden is very low. The state's total public sector net debt has fallen to only A$15.6 billion, or 35.9% of operating revenue, in 2002, due to the government's strong financial outcomes. Although this is high relative to some of NSW's “AAA” rated Australian state peers, its unfunded superannuation (pension) liability is the smallest of all the Australian states. Therefore, the net financial liability burden, which combines net debt and unfunded superannuation, is a very low 62.8% of operating revenue.

A planned ramp-up of the capital spending program of the capital-intensive state-owned enterprises, and the likely negative impact of recent weakness in investment markets on the value of investments used to offset the state's superannuation liability, could lead to some increase in this net financial liability burden in the short-term. Nevertheless, the medium-term trend is likely to be for further falls in the state's net financial liability burden.

This trend is set against a backdrop of the government's medium-term fiscal strategy, which is one of the more stringent and broad-based of all the Australian states. By NSW complying with its own fiscal targets, the state's credit rating is likely to be maintained at its current “AAA” level. The government's track record provides Standard & Poor's with comfort that it will meet these stringent targets.

Outlook:

The state sits comfortably within the “AAA” rating category. Any change to the rating would require several years of much weaker financial outcomes than currently forecast, combined with government inaction in addressing the problem. Standard & Poor's views either of these scenarios as highly unlikely.

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