Sky News contributor Campbell Newman says in Queensland, Victoria and to a certain extent New South Wales, the level of debt now is so extreme that there will come a moment “where the tap gets turned off”.

On Monday, Victoria’s triple A credit rating was downgraded to a double A rating, whilst New South Wales also suffered a similar fate with its rating being downgraded to double A-plus.

“For states it is critically important, debt does matter,” Mr Newman told Sky News host Peta Credlin.

“Talking about the states, well who’s lending that money?” Mr Newman said.

“International lenders, essentially”.

“And there comes a moment, if you can’t pay the interest, or you are trying to defer on payments and the like … that there will come a moment where the tap gets turned off”.