Budget forecast shows Victoria’s debt to almost double New South Wales within next three years

Victorian households will cop a debt double that of New South Wales residents within the next three years, according to the latest budget forecasts.

Victoria’s debt burden has been confirmed as double that of NSW according to latest budget forecasts.

The Minns government handed down its first NSW budget on Tuesday, predicting net debt to grow to $113.6bn by 2026-27, or $38,000 for every household.

That compares to current Victorian projections that show state debt is set to skyrocket to $171bn by the same time, or almost $70,000 for every household.

The true difference between the states is shows in comparisons of debt as a share of the economy.

While NSW net debt is now projected to peak at 12.6 per cent of GSP by 2026-27, Victoria’s is on track to hit 24.5 per cent in the same time.

Ratings agencies have raised concerns about Victoria’s growing debt, with warnings it could derail future major infrastructure projects and the state’s credit rating.

New land taxes and a Covid levy targeting big employers were introduced in Victoria’s May budget in a bid to curb the state’s spiralling debt.

Australian Prime Minister Anthony Albanese with Victorian Premier Daniel Andrews. Picture: NCA NewsWire

Businesses were also hit with 42 per cent hikes in WorkCover premiums, making the scheme one of the most expensive in the country.

Industry groups on Tuesday praised the NSW government’s efforts to follow a similar path and still wipe billions from projected debt levels.

NSW had been on track to hit $116.5bn debt by 2026-27, compared to new forecasts of $113.6bn by the same time.

“The Budget maps out a solid path to fiscal repair with a modest surplus anticipated in 2024-25,” Helen Waldron, NSW Head of peak employer association Ai Group said.

“While the details of the costs involved in achieving this budgetary outcome are not yet fully clear, the business community had anticipated reductions in programs while hoping for minimal increases in taxes and other charges.

“NSW businesses and employees will be relieved that the NSW Government did not follow the path set out by some other state governments to impose additional ad hoc levies on employment in this state.”

NSW Treasurer Daniel Mookhey delivers the 2023/24 NSW State Budget. Picture: NCA NewsWire

Shadow treasurer Brad Rowswell said the NSW budget highlighted the parlous state of Victoria’s economy.

“The NSW budget confirms that Victoria’s debt burden on our economy is twice that of NSW,” he said.

“This puts Victoria further at risk of a credit rating downgrade, meaning possibly higher interest rates and higher state taxes for every Victorian.

“The NSW government hasn’t slugged schools, renters and jobs with higher taxes for the next ten years – and they aren’t punishing health or holidays and tourism with new or expanded taxes.

“But in Victoria, all we get is more taxes and higher taxes – every two months under Andrews, a tax goes up or a new tax gets introduced.”

Mr Rowswell said the Andrews government had increased or introduced 50 new taxes since being elected in 2014.

It is this week expected to announce a tax on short stay accommodation.

NSW Treasurer Daniel Mookhey delivers the 2023/24 NSW State Budget in the Legislative Assembly at NSW State Parliament in Sydney. Picture: NCA NewsWire

“It’s been over two months since the Victorian Budget and there’s Premier Andrews talking about a new tax on holidays and tourism. A new tax, right on schedule,” he said.

Mr Rowswell has called on the government to fast-track its annual budget update amid growing concern about rising debt.

Former ANZ chief economist Saul Eslake said the disparity between the states was driven by two key factors: Victoria’s “rougher experience” during Covid prompted by the government’s repeated decisions to lock down, as well as large borrowings to fund its infrastructure agenda.

He said another factor was Victoria’s long-term Labor government.

“The Victorian government has taken a conscious decision to live with higher levels of debt in order to, as they would argue, provide the infrastructure that is needed for a rapidly growing population,” he said.

“Whereas New South Wales, which is also borrowing money to spend on infrastructure, isn’t doing so on the same scale and isn’t relying as heavily on borrowed money.”