Government's short-term focus leaves Victoria at financial risk, auditor finds
Victoria’s auditor-general has slammed the Allan government’s financial management, warning short-term fixes are failing as gross debt rockets toward $236.6bn by 2028‑29.
The Allan government is failing to properly future-proof Victoria against financial risk with the true impact of soaring debt yet to be realised, a damning new report has warned.
Responding to Victoria’s latest Annual Financial Report — which showed the government had shaved $816m off its expected operating deficit for the last financial year despite massive spending blowouts — the Victorian Auditor General’s Office on Monday warned the government’s focus remained too short term, lacking effort to build longer-term financial resilience.
“Despite the implementation of savings and efficiency measures in recent years, the cost of providing public services continues to rise,” it said.
“Based on current forecasts, planned cost savings of $6.3bn will need to be realised over the next four years to achieve general government sector (GGS) projected outcomes.
“The steps taken to date to respond to financial challenges have focused on addressing immediate fiscal pressures rather than strengthening long-term financial resilience.”
The report outlined a series of risks facing the Victorian economy, including rising interest costs of new and refinanced debt, increasing employee costs, expense management amid rising service demand, and a limited capacity to meet new revenue and income streams.
It also warned of unplanned cost escalations of major infrastructure projects and rising costs of government redress schemes.
“Emerging risks continue to threaten the state’s ability to meet short-term financial targets, deliver committed savings initiatives and maintain long-term sustainability,” it said.
“These risks exist in the GGS and beyond, requiring close attention and integration into longer-term financial management.”
The VAGO report warned rising debt levels were also a major concern while amid criticism that the government had “been unable to constrain rising expenditure”.
Net debt is forecasted to reach $194bn by 2028-29, but it is currently rising slower than initial projections — both as a percentage of gross state product and in real terms — reaching $150.9bn, or 23.7 per cent of GSP in 2024-25, compared to earlier forecasts of $155.5bn and 24.5 per cent of GSP.
At the same time gross debt rose from $168.8bn last year to $187.9bn and is projected to reach $236.6bn by 2028-29.
The VAGO report warned that a decade-long trend of debt growth consistently outpacing GGS revenue and state economic growth was likely to continue.
“Over the next four years, debt is forecast to increase at an average annual rate of 6 per cent, while revenue and GSP are expected to grow at rates of 3.6 per cent and 5.3 per cent, respectively.”
By that time the government will need to find $10.6bn a year to service its debt, compared to $6.8bn last year.
“When the government spends more money on interest payments, there will be less money available for public services,” the report warned.
Originally published as Government's short-term focus leaves Victoria at financial risk, auditor finds
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