Victoria and WA are fiscal hell and heaven

WA is in the black because and only because of the massive royalties from iron ore exports and cheap gas greedily fed into the state economy.

Every Australian should give a silent thanks every day for the nation’s rich endowment of coal, gas and iron ore, and China’s hypocrisy – and self-interested realism – on climate change.

But for the billions of tonnes of CO2-emitting coal, gas and iron ore we sell, especially to China, every budget across Australia would look like Victoria’s.

That’s all states and federal.

That’s to say, a grim reality of spiralling debt and pain – more and more pain – on both the tax and spending sides. Higher taxes and brutal cuts.

The two extremes of fiscal hell and something akin to fiscal heaven sit at opposite ends of the continent. And they are all about that endowment. Compare and contrast WA and Victoria.

A Victoria, which is on track to have debt not only greater than that of NSW, Queensland and Tasmania combined, but nearly equal to all five of the other states, including WA and SA, combined.

WA: a current budget surplus of $4bn. Indeed, surpluses stretching back to before Covid and surpluses projected forward uninterrupted into the fiscal future. And that’s after splashing money around, and without nasty Victoria-style tax hikes.

By mid-2027 WA net state debt is forecast at $36bn or less than 10 per cent of the state economy. Victoria: a current budget deficit of $10bn.

In sharp contrast, deficits stretching back to before Covid and into the fiscal future as well – albeit, claiming to finish ever so slightly in the black in 2025-26.

That claimed $1bn surplus is a sick fiscal joke; a fiscal ‘rounding error’. It won’t arrive and by then Chairman Dan will be long gone. Victoria projects its state debt to hit $171bn or close to 25 per cent of the state economy by 2026-27 – in relative terms, fully two-and-half times WA’s.

WA Premier Mark McGowan and Victorian Premier Daniel Andrews. Picture: AAP Image/Marc McCormack

Take note, take very close note, that the Victorian figures are built on a foundation of unbridled, utterly unrealistic optimism. Premier Daniel Andrews and his treasurer Tim Pallas are still almost literally betting the state – certainly, it’s future – on the ‘Big Build’ pouring billions into infrastructure, and the immigration Ponzi pouring hundreds of thousands into Melbourne.

The stark financial difference doesn’t come from a Premier McGowan leading a government of great fiscal integrity and austerity in WA.

Far from it, he can and has splashed money around like any other premier and indeed his own predecessors.

WA is in the black because and only because of the massive royalties from iron ore exports and cheap gas greedily fed into the state economy.

Victoria lacks that rich endowment; but worse, has set out to deliberately destroy what it had – so far as gas and Latrobe Valley brown coal are concerned – and prohibit the discovery and obviously development of any more.

The budgets that sit between the two extremes – notably Queensland and NSW – reflect their relative resources endowments, and, so far, their willingness to exploit them.

For them it should be a simple question: do you want Victoria’s fiscal future or WA’s?

Exactly the same applies federally as well.

Without the gas, the coal, the iron ore – and China - we’d be a banana monarchy.

Originally published as Victoria and WA are fiscal hell and heaven