The Victorian Budget shows how quickly things can go from bad to worse

The Victorian state budget is an instructive – and ominous – pointer to the bigger one out of Canberra next week.

Victorian Treasurer Tim Pallas.

The Victorian state budget is an instructive – and ominous – pointer to the bigger one out of Canberra next week.

The single biggest message out of Victoria, is how quickly a budget can turn seriously sour.

The alarm bells it should be ringing – obviously most directly to 7 million Victorians, but really also to all 27 million Australians – is how quickly it can then go from sour to terrible and potentially catastrophic.

It is already clear that Treasurer Jim Chalmers has “not got the message”.

He is gaily splashing money around to “Make the Future, Right Here in Australia”, and blithely accepting a return to federal budget deficits.

Back in the balmy pre-Covid days of 2019, that was exactly, if utterly unknowingly, the stance adopted by the Andrews-Pallas Victorian Labor government.

Back in 2019, Victoria was going to have its “Big Build spending splurge-athon”. But the state debt would only go up to $55bn and now be flattening out around that figure.

In fact, it’s at $115bn and projected – as best case, in my judgment – to go to $188bn by 2027-28.

In a small deception pointing to the much larger deception – actually, deceptions, plural – Treasurer Pallas stresses that the interest bill will “average” (my emphasis) 7.8 per cent of state revenue over the next four years.

Yes, but the debt, and the interest bill, is rising – leaping – from year to year. By 2027-28 interest will be taking nearly 9c of every single dollar of total state revenue. And rising.

And even that’s on the basis of the budget’s – to use a gentle word – optimistic projections, which are in turn built on the big deceptions.

Pallas gets the numbers to look half-good only by “postponing” spending.

He is “postponing” infrastructure spends – schools, hospitals, and elements of the “Big Build”, but not the silliest and most uselessly expensive one of

all – the tunnel from and to nowhere.

Pallas has also made ludicrously tough projections on public service numbers and cost.

The state pay bill is forecast to rise just 11 per cent in four years, and not at all in the fourth year itself!

All of this just means that massive rises in spending – on infrastructure and on desperately needed police, teachers, nurses etc etc – will come with a rush some time “tomorrow”.

And it will be “doubled-up” because of the state’s massive immigration-driven population surge.

The really ominous number Pallas did not mention is that by 2027-28 the interest on the state debt will be sucking up not only 9c in every dollar of total revenue, but 20c in every dollar of actual state taxes.

Victorians will be paying $45bn in state taxes, but getting back only $36bn of spending on hospitals, schools, roads and the rest.

Remember also, this is at “optimistic projecting best”.

That’s the real price of exploding debt – and Victoria’s will be set to explode even more after 2027-28.

There’s a similar flavour building to next Tuesday, with Chalmers thinking he’s a fiscal genius, for just riding the rivers of gold from selling iron ore, coal and gas to China.

Originally published as The Victorian Budget shows how quickly things can go from bad to worse