This year marked the 30th Anniversary of Paul Keating’s famous “banana republic” statement. To celebrate, Standard and Poor‘s lowered our credit rating outlook to “negative” from “stable”. Given what happened in the election last Saturday, the challenges we still face in transitioning away from the mining boom, and the size of our current account deficit, an outright downgrade may not be too far off. Under ordinary circumstances, a downgrade to Australia’s credit rating outlook (let alone an outright downgrade to the rating) would put downward pressure on the Australian dollar and upward pressure on our sovereign bond yield. The yield on semi-government and corporate bonds, priced as a spread over government, would also be higher. Keep reading for our take on the Australian economy and what a credit rating downgrade could mean.