Household income in Victoria has fallen behind Tasmania for the first time, according to an extensive audit of the state’s finances by economist Saul Eslake, who predicts voters will face hefty spending cuts and more tax rises to pay down debt.

Victoria has fallen from the richest and most powerful state for most of the past century, to at or near the bottom across a range of key economic indicators, which Mr Eslake blames principally on bloated spending beyond the government’s means and cellar-dwelling productivity performance.