James Campbell: Public sector bonanza a recipe for trouble

Victoria’s $33.6 billion public sector bonanza has coincided with a historic slump in wages growth — and the gap is set to increase, writes James Campbell.

You don’t have to be Sherlock Holmes to deduce how well Tim Pallas and Daniel Andrews are spending our money on their so-called Big Build.

You can guess it from the information they have dropped from this year’s budget. If you are so minded you can turn to last year’s Budget Paper 4 where you will find nearly 200 pages of detail about the state’s capital expenditure program.

For example, on page 82, you can read that the West Gate Tunnel had a total estimated investment of $6.3 billion, of which $2.5 billion had been spent so far, and another $1.6 billion was to be spent in the financial year which ended this June.

The project is — or rather was — estimated to be finished in by halfway through 2023. All very interesting.

A bit too interesting it would seem, because the information is missing this year, along with updates on how things are going in every other corner of the state budget.

Asked about the absence at his press conference this morning, the Treasurer explained it had all been a bit hard this year, what with the COVID situation.

The good news is the information will be made available in a year’s time, once reviews into each project has been finished.

Victorian Treasurer Tim Pallas has unveiled his budget. Picture: Daniel Pockett/Getty Images

Asked how many were now over time and over budget, the best he could say was “a substantial minority”.

One thing we can see clearly is how much the Victorian government’s wages bill has jumped since Labor came to office.

Brace yourself. In 2013-14 – the last full year of the Napthine government, Victorians spent $20.9 billion on the wages and super of the state’s public servants.

In the financial year that ended in June, we spent $30.7 billion. This financial year, we will spend $33.6 billion.

Any way you slice it, a 60 per cent increase over seven years is pretty good going over a period in which inflation has been less than 3 per cent.

Some of the increase can be explained by the growth the number of people the government is employing.

But nowhere near all of it. In the first five years they were in office, the number of public servants grew by 47,000 or roughly 18 per cent.

It might have jumped a bit since 2019, the last year we have numbers for, but not that much.

Premier Daniel Andrews discussing this year’s budget in parliament on Tuesday. Picture: NCA NewsWire/Ian Currie

This year alone, the government estimates employee expenses will jump 9.5 per cent.

Over the forward estimates, it estimates will only rise by a “modest” 3.4 per cent to reach $37.1 billion by 2023-24.

But going by history, you’d take that with a large grain of salt.

Back in 2015, the Treasurer was estimating the wages bill at the end of that year would be $25.3 billion by the end of the forward estimates. It ended up being $28.6 billion.

To be fair to Pallas, the 12 per cent he was out on those numbers, pales in comparison to the miscalculation of the debt to GSP ratio.

Back in 2015, he was predicting it would be 4.4 per cent. Today’s budget papers show it was actually 9.6 per cent, which is set to rise to a whopping 28.9 per cent by 2023-24.

Does the public sector wages bill matter? If private sector wages were growing at a clip, the answer would be no.

But Victoria’s public sector bonanza has coincided with a historic slump in wages growth in Australia.

The gap between how Victoria’s public sectors workers are doing and the rest of us is growing and looks set to increase. It’s a recipe for trouble.