Labor will borrow $25.6b for key infrastructure, doubling net debt, if re-elected on Saturday

Victoria’s debt could soar past $48 billion under Labor as it borrows big over the next decade to build the North East Link, airport rail and level crossing removals.

Victoria’s debt could soar past $48 billion under Labor as it borrows big over the next decade to build the North East Link, airport rail and level crossing removals.

Treasurer Tim Pallas has laid bare his plan to fund the projects, as his party promised to start work on the North East Link on Monday if re-elected.

The Andrews Government would borrow as much as $25.6 billion extra over the next decade, doubling debt to 12 per cent of Gross State Product. It could reduce borrowings if the federal government boosted its contribution to the projects.

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Victorian Treasurer Tim Pallas released Labor’s costings today. Picture: Alex Murray/AAP

The Coalition said it would build the North East Link, East West Link and airport rail without sending debt “through the roof”.

Shadow Treasurer Michael O’Brien said the Coalition’s $17.5 billion in promises were fully funded, in part through a $5 billion plan to lease Melbourne’s sewage system and by redirecting more than $200 million from Labor projects.

He batted away criticism that the Coalition had failed to explain how it would pay for costly infrastructure, saying today’s costings only detailed spending over the next four years and did not include private sector contributions.

“These are projects that are not going to be completed in one term,” he said. “There is more than enough money to get this show under way.”

Shadow Treasurer Michael O'Brien unveiled the Coalition’s plan. Picture: David Crosling/AAP

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Mr O’Brien then took aim at Labor’s “debt bomb”, which he warned could amass $2 billion in interest annually and mean less money for health, police and education. “Labor is completely reckless, they are prepared to mortgage not only our kids’ future but our grandkids’ future,” he said.

But Mr Pallas said Victoria would pay the price for failing to build key infrastructure.

He said net debt would rise by about one per cent of GSP annually over the next four years, before increasing when construction on the projects was underway.

“We have to borrow to build,” Mr Pallas said. “By spreading the cost over more than a decade it means we share the cost of the infrastructure across generations.

“We will pay some, our kids will be the principle beneficiaries of these investments.”

Despite the rising debt, Labor’s costings showed Victoria would retain its AAA rating and did not include any new or increased taxes.

Victoria recovered from horror debt levels in the early 1990s under Liberal premier Jeff Kennett, and net debt remained below $2 billion between 2002 and 2007. It began climbing in the last stages of the Bracks-Brumby government, and leapt over 6 per cent of GSP during the Baillieu-Napthine government.

Debt fell to 3.9 per cent of GSP in 2016 but climbed back to 5.4 per cent in this year’s budget, totalling $19.6 billion.

Both Deloitte Access Economics economist Chris Richardson and Infrastructure Partnerships Australia chief executive Adrian Dwyer today said the borrowings could be considered good debt.

“Borrowing to fund giveaways wouldn’t be smart but borrowing to fund productive infrastructure is a prudent and welcome decision,” Mr Dwyer.

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