Moody’s associate managing director Atsi Sheth said today that while leadership challenges were part of the democratic process, “if political uncertainty leads to economic policy uncertainty or dampens business sentiment, it would add to the challenges facing the Australian economy”.

The warning comes after Malcolm Turnbull deposed Tony Abbott in a party room vote last night for the leadership of the Liberal Party.

While Ms Sheth said leadership challenges did not, in and of themselves, pose a risk to a country’s sovereign credit rating, the most recent leadership challenge “occurs at a time when economic and fiscal challenges are rising”.

“A multi-year period of strong growth supported by commodity-related investment and exports has come to an end,” she said.

“It is not yet clear to what extent Australia’s still competitive and flexible economy can develop sources of growth that offset the impact of weaker demand from China.”

One of the key reasons Mr Turnbull gave for moving against Mr Abbott was the perceived poor economic management of the leadership team.

“Without a return to strong growth, fiscal goals will be harder to meet,” Ms Sheth said.

The agency said past leadership challenges in Australia had not led to shifts in the economic or fiscal policy framework, which was important from the sovereign credit perspective.

Australia currently holds a AAA credit rating, which keeps borrowing costs low at a time when the nation’s debt load is increasing.