Victorian Budget: Tim Pallas hands public servants a win, slugs everyone else

I was prepared to give Tim Pallas the benefit of the doubt, but he’s given Victoria a two-speed recovery in which only the public servants win.

There are two bottom lines to Treasurer Tim Pallas’s all-red budget.

It’s red in fiscal ink. There are deficits and rising debt as far as the fiscal eye can see.

If all goes well – to stress, if all goes well - we’ll have the annual deficit down to “only” $2.1bn by 2024-25 and state net debt will have risen to $156bn.

And it’s red in terms of politics. Pallas is bashing business and property investors and developers to raise taxes to pay for public servants and their regular annual pay rises.

Taxes will be $9bn a year higher by 2024-25 compared to the last ‘normal’ – pre-virus - budget in 2019-20, a massive 40 per cent leap in the tax burden on Victorians.

The cost of public service salaries leaps over the same period to be $7bn a year higher by 2024-25; and by then the salaries will be costing Victorians over $34bn a year.

Pallas is also raising taxes to pay for the government’s devastating mistakes through 2020.

The payroll tax levy is specifically to fund new and additional mental health services. Pallas specifically linked the need to last year’s lockdowns.

Victoria had, so disastrously, more than six months of lockdown compared to three months in the rest of Australia because of the hotel quarantine blunders.

And that’s to say nothing of the 900 deaths, fully 90 per cent of all the virus deaths so far in Australia.

Now, Pallas had previously broadly delivered finely balanced blue-red budgets – budgets that funded Labor programs and big infrastructure spending, but still had fiscally responsible, surplus, bottom lines.

That’s all been ditched in this all-red budget, precisely and entirely because the government has not been prepared to tackle either public service numbers or their guaranteed future pay rises.

Last year there were two very different pandemics for Victorians.

One was for businesses that were forced to close and their workers losing their jobs for more than six months – uniquely in Victoria thanks to the hotel quarantine disaster.

The other was for public servants, who not only didn’t lose their jobs but got paid additional stay-at-home allowances.

Now Pallas has signalled there will be two post-pandemics for Victorians as well.

Public servants will keep their jobs and pay rises; business will get slugged with extra payroll tax; and property owners and buyers with extra land tax and stamp duty.

Up until he unveiled his budget, I was prepared to give Pallas credit for actually being prepared to take the tough decisions to try to cut the deficit that his fellow Victorian, Josh Frydenberg, had squibbed the week before.

Even if the tough decisions were concentrated on raising taxes and not cutting spending.

Then came the detail. He’s actually done squat to cut the deficit. The tax hikes are all to pay mostly for the public servants and, secondly, the new mental health program that’s needed thanks to his government’s disastrous mishandling of the virus last year.

Yes, the deficit is being cut. But it’s entirely due to the much stronger economic growth than the government and its advisors (just like the same lot in Canberra) were projecting last November.

By 2023-24 the deficit is projected to be down to $2.1bn. In November it was still going to be $5.9bn.

We are still headed for net debt of a mammoth $156bn (and then, still rising). Except now it’s supposed to come a year later, in 2024-25. Whoopee.

Remember, all this assumes the sun keeps shining, the virus stays beaten and the students and the tourists start flooding back into Australia and especially – with those students - Victoria next year.

Originally published as Victorian Budget: Tim Pallas hands public servants a win, slugs everyone else