Victoria’s spiralling credit rating to come under fresh pressure in upcoming state budget announcement

Experts have warned that Victoria’s worrying credit rating will be pushed to breaking point in Tuesday’s state budget — unless the Treasurer can step in and save the day.

Victoria’s record low credit rating will come under increased strain in Tuesday’s state budget unless Treasurer Jaclyn Symes can rein in spending and stabilise debt, experts have warned.

The Treasurer has been put on notice that unless she can control operating costs, make massive savings and slow the growth in debt, Victoria could face a damaging credit downgrade.

Such a move would lead to increased borrowing costs and further drive up Victoria’s ballooning debt, which is on track to hit $187.3bn by 2028, but tipped to rise higher in the budget.

Premier Jacinta Allan with Treasurer Jaclyn Symes. Picture: Andrew Henshaw

It comes amid new analysis by the state Opposition that has cast doubt over the accuracy of the government’s budget process.

Shadow treasurer James Newbury said since 2015 the government had overspent its own budget forecasts by an average of $14bn a year.

In the same time, capital spending had ballooned by 18 per cent each year, far outpacing population both growth and revenue.

And operating expenses growth had averaged around 7.2 per cent despite recent projections forecasting spending growth of just 0.2 per cent.

“Labor’s Budget is a big con job. Fake figures and dodgy numbers,” Mr Newbury said.

“Detailed analysis of ten years of Labor has revealed they have been lying to Victorians year after year in their budgets.

“They have been hiding how much they are taxing, not coming clean on how much they are spending, and covering up how deep our State is in debt.

“To grow our State and turbo charge confidence in our future, we need certainty.”

Liberal Shadow Treasurer James Newbury. Picture: David Caird

Mr Newbury recommitted the Coalition to implementing no new taxes under an elected Battin Government.

S&P Global Ratings analyst, Rebecca Hrvatin, warned Victoria’s rating — the lowest in the nation — would face downgrade pressure without a degree of fiscal discipline in the budget.

“Fiscal discipline will be key to maintaining the ratings and containing costs of the state’s large infrastructure program,” she said.

“What we will be looking for in the next budget is the state’s commitment to controlling operating costs and stabilising debt levels.

“We view Victoria’s commitment to controlling operating costs, making cost savings, and slowing growth in debt as important.”

Ms Hrvatin said while the state’s budgetary performance was “on an improving trend” it remained weaker than its position prior to the pandemic.

And expected operating surpluses were at risk because of rising operating expenditure.

She also blamed the state’s “very large infrastructure program” for cash deficits up to 20 per cent of revenue, which were high compared with similarly rated peers.

“Given that Victoria’s budgetary performance is still weak, debt will continue to rise, but at a slower pace than in recent years,” she said.

Official forecasts show Victoria’s debt is on track to hit $188bn by 2028, but blowouts on major projects and the government’s wages bill are expected to significantly impact that figure.

The government is frantically working to avoid a debt blowout, sources warned could see net debt exceed $200bn for the first time in the state’s history.

Former Department of Treasury and Finance deputy secretary, Michael Brennan, this week said it was vital the government drastically reduce investment in capital projects and cut spending.

And he has warned that the budget could be completely undermined by over-optimistic forward estimates which blur the state’s true financial position.

Originally published as Victoria’s spiralling credit rating to come under fresh pressure in upcoming state budget announcement