It’s the ‘Big Build’, stupid: Victoria’s mess spreading nationwide

The Comm Games economic and reputational catastrophe shows Victoria urgently needs a comprehensive and independent audit of its infrastructure spending and financial position.

Builders are going broke and costs are rocketing with the supply and price of skilled labour.

The great and only partially recognised element of Chairman Dan’s Commonwealth Games financial, economic and reputational catastrophe is the way he brought it entirely on himself and on seven million Victorians.

But worse, far worse and more broadly, the disastrous dynamics he had unleashed and which directly caused the mess, are actually sucking in and spreading to all the rest of Australia as well.

Bluntly, it is beginning to look awfully a lot like 1990 again, with a building and construction cost explosion and then implosion, centred on Victoria, triggering a national meltdown.

How did the cost of the Games suddenly explode from $2.6bn to $6bn-7bn – something that the Chairman didn’t care to share? As one astute observer put it to me: “It’s the ‘Big Build’, stupid”.

Victoria’s – directly, Chairman Dan’s – mad, bad infrastructure spending, coming off the supply disruptions from the Covid era, has sucked up supplies of everything in construction and building and sent their prices rocketing. This includes, most critically, both the supply and price of skilled labour, with wages on the big projects going to $80-$120 and more an hour.

Is it any wonder builders are unable to finish projects? Are going broke? Shutters going up across building and construction, from single houses to 15-storey apartment buildings? Is it any wonder, that the prospect of building the Games-related projects in regional Victoria was looking somewhere between way-over-the-moon expensive and utterly impossible? Certainly, in just the three years left?

Then, Victorians especially, if the Games cost could explode from $2.6bn to $6bn-plus; what’s happening with the “Big Build” project costs?

The – already exploding – Victorian debt projections, already to a figure way above NSW and Queensland debt combined, assume “yesterday’s” build costs.

So what is the real debt Victoria is heading for?

Victoria urgently needs a comprehensive – and need I add, clearly independent – audit of the “Big Build” and the state’s financial position.

Whatever, there is almost zero prospect of Victoria holding on to its current – lowest of the states – credit rating. Furthermore, unlike 1990 and the dying days of the Cain-Kirner Labor years, the state no longer has an electricity system to sell off to pay off the debt.

The direct costs of Victorian Labor’s “Big Build” to the rest of Australia might be muted.

But everyone is going to feel the pain in the government-caused inflation and the prospect of interest rates going higher and staying higher for longer, even into a recession. Yes, the initial inflation of 2022 might have been caused by the Covid stimulus, the disruptions from the Covid years, plus Ukraine. But the inflation of 2023 – and 2024, and 2025? – can almost all be laid at the feet of government.

The government in Canberra and what it’s done to the prices of electricity and gas.

The government in Melbourne and its equally crazy “Big Build”. The RBA is called on to fight it, by squeezing both households and business with interest rates. There’s been an all-too comfortable assumption that inflation had peaked and would fall if not exactly rapidly but surely back to 3 per cent.

Government might just be making that impossible.