Victoria records $6.5b deficit amid virus fallout
Victoria’s net debt has soared, with the state recording a $6.5 billion deficit, and as the dire situation is blamed on the government’s COVID-19 response, warnings are growing that the full effects will be felt for years to come.
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Victoria has recorded a $6.5 billion deficit with net debt soaring amid dire predictions of more economic pain ahead.
The government’s 2019-20 financial report, released today, shows net debt for the year to June 30 has increased by $18.8 billion to $44.3 billion.
The figure, blamed on the government’s COVID-19 response, is $4 billion higher than expected and at 9.6 per cent of estimated gross state product.
While that figure remains below the government’s 12 per cent net debt to GSP target, the report has warned that “the full effects of COVID-19 on net debt will continue to be felt in future years”.
“This, in part, reflects additional borrowings required to finance the Government’s COVID-19 response as well as the government’s infrastructure program,” the report said.
Victoria’s revenue was $3 billion less than expected, with significant drops in traffic fine and gambling revenue.
State taxation revenue was $1.2 billion less than anticipated and caused in large part to payroll tax waivers and refunds.
And while revenue was down, government spending exceeded estimates by $4.2 billion.
Employee expenses of $27.2 billion were $1.1 billion above the revised budget estimate and $1.8 billion higher than last financial year.
The increase was attributed to extra resources to combat COVID-19, and bushfires earlier this year, as well as pay rises in the public sector.
The $6.5 billion deficit is expected to soar higher following Victoria’s second lockdown.
“The 2019-20 operating result was $7.2 billion lower than the revised estimate in the 2019-20 Budget Update,” the report said.
“This is primarily due to the impact of COVID-19 and the Government’s response.”
Treasurer Tim Pallas has been contacted for comment.
He is tipped to deliver his state budget next month.
Daniel Andrews has promised the “biggest and most significant” state budget in Victoria’s history.
He added that infrastructure funding in the state budget would eclipse the $1.1 billion in infrastructure investment allocated to Victoria in this month’s federal budget.
“I can assure you that our total capital investment will be well more than $1 billion,” Mr Andrews said.
“It will be well more than that, and it will be in metro Melbourne, it will be in regional Victoria, it will be small projects that are really about employment.”
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