Treasurer Tim Pallas defends Victoria’s economic management ahead of budget

Treasurer Tim Pallas has dismissed concerns about Victoria’s credit rating, saying the state’s post-pandemic recovery has been “remarkable” while the opposition warns of soaring debt levels.

Treasurer Tim Pallas has dismissed concerns about the state’s credit rating ahead of next week’s state budget.

Amid reports leading credit agency Moody’s has warned of “downgrade pressure” on Victoria’s credit score, Mr Pallas defended the state’s economic management.

But shadow treasurer David Davis has warned that soaring debt levels needed to be brought under control.

Victoria’s debt has risen from $22.3bn in 2014-2015 to a projected $162.7bn by 2024-25.

“The government needs to show, in the first instance, some mechanism to control it’s out of control projects,” Mr Davis said.

“Otherwise Victoria faces a bleak future and a weaker position than other states.

“We will carry more debt and it means that our future capacity to fund public services projects will be diminished compared to equivalent states.”

Victorian Shadow Treasurer David Davis has warned soaring debt levels need to be brought under control. Picture: Andrew Henshaw

Mr Davis said while all states had taken on more debt to respond to the pandemic, Victoria’s debt challenge was not wholly a consequence of Covid.

“The state’s budget was in deficit on the last day of 2019, before Covid,” he said.

Mr Davis said Victoria’s debt was now 80 per cent larger than the debt carried by the New South Wales economy.

But Mr Pallas defended the government’s economic management.

“Victoria’s recovery has been remarkable and we’ll continue to provide the conditions that allow businesses and workers to get ahead,” he said.

“We invested more than $44bn in getting Victorians through the pandemic and supporting the economic recovery, because we know that creating jobs and restoring economic growth is the first step to fiscal repair.

“We’ll continue to grow the economy while ensuring we are maximising the return on every dollar we invest.”

Treasurer Tim Pallas has defended the state’s economic management. Picture: Andrew Henshaw

Mr Pallas said the creation of 280,000 jobs since September 2020 put Victoria’s unemployment rate at a record low 4 per cent.

Moody’s, who along with S&P downgraded Victoria’s AAA credit rating following the 2020 budget, said last year the state’s economic recovery had exceeded expectations.

However John Manning, vice president Moody’s Investors Service, warned the government’s large capital spending plans – expected to average $22.5bn annually over the next four years – would continue to drive Victoria’s debt burden significantly and persistently higher.

“Despite our expectation of a declining risk of sporadic shutdowns as vaccines are rolled out, and the underlying strength of the Victorian and the broader Australian economic recovery, Victoria’s debt burden is unlikely to stabilise before the end of fiscal 2025, which further delays the state’s capacity to pursue fiscal repair,” he said at the time.