Terry McCrann on Victorian state Budget 2017-18: Sensible, sustainable spending just the ticket

THE state economy is riding high on the property boom and Tim Pallas is “clipping the ticket” — like an old-fashioned tram conductor — along the way, writes Terry McCrann.

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THE state economy is riding high on the property boom and Tim Pallas is “clipping the ticket”, like an old-fashioned tram conductor, along the way.

The result is what can fairly be described as a “beautiful set of numbers”.

That’s beautiful for the state, beautiful — broadly — for taxpayers and service consumers, and certainly beautiful for an incumbent government a little over a year and one more budget out from an election.

But not so beautiful for Opposition Leader Matthew Guy: there’s precious little fiscal grit for him to work with.

The state gets to spend more money on much-needed police, hospitals, schools and infrastructure without openly increasing taxes — it certainly ain’t cutting them either — and it still ends up with a bottom-line surplus that federal Treasurer Scott Morrison would lust after.

There’s precious little fiscal grit for Opposition Leader Matthew Guy to work with. Picture: Lawrence Pinder

Victorian Treasurer Tim Pallas is “clipping the ticket”, like an old-fashioned tram conductor. Picture: AAP Image/Julian Smith

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Pallas laid great stress on Victoria keeping its Triple-A credit rating, by running a strong budget surplus and keeping net state debt at a modest 6 per cent of the state economy (net federal debt is closing on 20 per cent of the national economy).

This points to the two big qualifications. Firstly, all the Budget numbers assume the state — and national — economic suns will keep shining. If they don’t, if the property boom in particular goes seriously negative, Pallas’s numbers would implode.

Secondly, if the feds were to lose our national Triple-A rating, even with its good numbers Victoria would as well. That’s the way the system works — a state can’t have a higher rating than big brother.

So Pallas’s budget is “hostage” to next week’s big budget in more ways than one: the rating; our share of the infrastructure spend; and the GST split.

On infrastructure, the decision by the feds to build the second Sydney airport is obviously good for that city, and it is good for the nation. But it will further weight the spend against Victoria.

It would make both good politics and good policy for the federal government to stop politicking over the $1.5 billion or so due Victoria to spend on transport infrastructure. It really is up to the state government where that money gets spent.

Subject to the numbers being fiscally believable, Pallas has produced not only a fiscally responsible budget, but also a good Labor budget.

It spends money where people who elected a Labor government are entitled to have it spent, but it spends it in a way that is both fiscally sensible and, perhaps more importantly, sustainable.

The two numbers that capture this are the way expenses growth is held to a modest 3.2 per cent a year (with revenue rising by 3.7 per cent a year), and, while a thumping $38 billion will be spent on (much-needed) infrastructure over the next four years, net debt only goes up $11 billion.