Report assesses how close the budget performed compared to how it was predicted to
The Andrews government’s latest budget report reveals lower spending on Covid tests has helped the bottom line but there are grave fears about soaring interest rates.
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Victoria’s state finances have received a $3.8 billion boost to their bottom line after the government brought in more stamp duty and spent less on rapid tests.
But the latest report into the state’s budget also showed it was vulnerable to interest rates, with $2.7bn likely to be added to the debt every time the cash rate rises by 0.5 per cent.
Six weeks out from the election, the Andrews government has released its annual financial report which assesses how close the budget performed compared to how it was predicted to.
Treasurer Tim Pallas reported that the operating deficit for 2021-22 was $13.8bn compared to the $17.6bn first estimated.
The improved bottom line was largely linked to government spending less on rapid antigen tests and other Covid measures and from a hotter property market.
An extra $167m was brought in from stamp duty than anticipated while high unemployment meant payroll tax also improved.
Stamp duty has bounced back so significantly that $10.3bn was collected in the last financial year, compared to $6.4b during the 2020-21 period which was affected heavily by Covid.
The improved figures meant the state’s net debt this year was $99.9bn, which was $2bn less than forecast.
Over the next four years, this is expected to hit $167bn, higher than any other state.
“Record support provided for families and businesses meant we were in the best shape possible to really bounce back after the worst of the pandemic had passed – and that’s exactly what has happened,” Mr Pallas said.
“The jobs market is strong, businesses are confident and the state’s financial results have improved from the forecasts that were updated just five months ago.
“We’re moving ahead, which is a credit to all Victorians.”
But Shadow Treasurer David Davis warned the annual financial report showed worrying signs for the Victorian economy.
He said the risk of financial pain from interest rates had doubled, with the Treasury predicting a $2.7bn whack to the budget for every 0.5 per cent increase.
“Victorians should be concerned about the massive growth in the state’s debt,” Mr Davis said.
“While it is ever so slightly smaller than was estimated at one point, it is still an increase from 72 billion to (almost) $100 billion in debt for the state
“This double whammy effect of more debt and a rollover (of finances) at a much higher interest rate will really clobber the ability of the budget to do what is needed with infrastructure and with services.”
Mr Davis also said the figures showed Victorians were paying $438m more in taxes and that the government had taken $400m in dividends out of the Transport Accident Commission.
‘A huge impact and a huge pressure on families and communities,” he said.