 of budget deficits. For more, let's get Mark Bailey from FIG Securities. He's take on this. Mark, thank you for waiting so patiently for the treasurer to go through with his argument about what all this means. We know that neither he nor Chris Bowen, the other possible contender for that job, want to be the one who sees the credit rating pooled from Australia's grass to see that AAA rating pool. But first of all, your take, SMP choosing to move now, to move even before we have a clear indication of who the government will be. Is this just a warning shot or does it kind of illustrate how keen or how sure they almost are that we will see a downgrade of Australia's credit rating? Yeah, I mean, that's a really good point, Carrington. I think let's really understand what the negative outlook actually means. So when a rating agency puts a company or in this case a sovereign on negative outlook, what that actually means is that there's a one in three, only a one in three chance of a downgrade within the next two years. So it's not like it's a negative credit watch or on review for a downgrade where there's going to be an actual formal review process that takes place within two or three months. So it's not as severe at that. It is kind of a very mild warning shot across the bow. And as you've rightly pointed out, the election isn't decided fully yet, but it looks like we're going to either have a hung parliament or some kind of weak coalition government. But SMP's talking points in the research piece that they've published with the change in the outlook is very much focused on that fiscal deficit and controlling the budget. And what they've said previously is that that was likely to come in balance by 2013. That was the previous government's estimate. And that balance budget is now looking out into 2021. So kind of a further eight years out there. And obviously they can either tackle it by tackling spending or by tackling the revenue side of things. But in either case, it looks like that whichever government goes forward in the next few years is probably going to have a very little stomach or very little ability to try to address those issues because it's not got a strong mandate from the electorate. So that's going to be the problem going forward. In terms of the market's reaction, it hasn't been that great as you've seen in terms of the currency. The currency is down probably about 30 ticks. But in terms of the two years and the 10-year Aussie government bonds, they've probably moved one or two basis points. So I think it was potentially priced in the market. There'll be huge headlines tomorrow in all the newspapers. But is it a big factor for the financial markets? Not really. Is it a bit of a dent in the pride? Possibly. But I guess facetiously, you've just lost 3-0 in the rugby to the English. So the pride's already been hit. But in all seriousness, it's not the end of the world. It would be double A plus in that regard for the foreseeable future. And that's a very, very strong rating relatively. And in terms of the yields and what the attractiveness of Australia, it's not really going to dampen that from a foreign investor's point of view. Well, we are looking at the Australian dollar chart there. We did see an immediate sell-off in the aftermath, about a half of a cent. But it does look like it's now coming back. It does look like they're heeding your words, as it were Mark, suggesting that maybe it isn't as big a deal as you say. This isn't a clear indication necessarily that we will see a downgrade, an actual downgrade of Australia's triple A. But things as you brought up the rugby, Australia still has a triple A credit rating, unlike the UK, who saw a drop from triple A down to double A in one foul swoop. Take us through how quickly things can deteriorate here. But also the fact that Australia still has that credit rating, is it actually making a big difference to things like the pricing of our bonds? Is it making a big difference to the rates that people are paying on their home loans? Or is it all a little bit overblown? Look, I don't think a triple A rating is probably not what it was 10, 15, 20 years ago. I think it's changed significantly because the rest of the world has changed and there's been fewer and fewer members of that triple A club. I think there's only about 10 or 11 left and obviously if Australia falls by the wayside there'll be even one fewer. And in that regard, you've seen the US lose its triple A rating back in August 2011 and what happened there was actually bond yields fell exactly the same situation in the UK and that's a fairly mild and not particularly interested reaction from the government bond market in Australia on this news. It isn't a downgrade, but again it's a step in that direction. But I think it was widely expected that you would see some kind of reaction from the rating agencies either in terms of an outlook change or maybe even a step further being put on review on negative credit watch or review for downgrade and that hasn't happened. So you've had Moody's and Fitch come out at the moment and reaffirm Australia triple A with a stable outlook. Maybe they changed that once the new government does come into power and they get a better sense in terms of those fiscal targets which S&P has highlighted and the rest of the market knows needs to be addressed if it is to maintain its triple A rating. Another factor that S&P raises in its report as well is the significant amount of external funding which Australia requires given its small demographics. It's very reliant on offshore investors to fund that current account deficit and fund the government debt and also the state debt as well. And it does mention the state's balance sheets as well and says over the next two years there's likely to be continued deterioration at the state level as well. So that again indicates that you're going to see some kind of fiscal pressure on the states if they want to maintain their current ratings respective of where they are at the moment. But so it's the same everywhere. Governments are under fiscal pressure to try to drive growth but they've got their own constraints in terms of what they can do in terms of balance sheets and also from the rating agency's point of view and that's putting pressure more and more on the monetary authorities of each country or each region in the case of the ECB and to try to stimulate that growth and it's a difficult situation but I think in terms of bond yield in terms of market reaction in terms of what people are going to pay for mortgages I think this is going to be a material impact in that overall cost. I think it's going to be more important in terms of what potentially happens in the UK property space and their impact on UK banks and also what happens in the Italian banking sector in terms of the bailouts there and that in terms of global relative value and the impact on the Australian banks cost of funding when they fund in that global market will have a much bigger impact than Australia being cut by one notch to either AA1 or S&P's case AA+, you know I think that's going to have a much bigger impact on the banks cost of funding which will be fed through in terms of their the rates that they charge on the mortgages and on the deposit accounts as well. Okay Mark Bailey thank you so much for your insights we'll talk to you soon. Thanks Carrington.