‘A bit of tension’: Treasurer quits parliament after 18 years as state bogged down in debt

Treasurer Tim Pallas has announced he will quit state parliament, triggering a byelection in the seat of Werribee and vacating the post of Treasurer at a time when Victoria is mired in billions of dollars of debt.

At a snap press conference on Monday, Pallas revealed he was stepping down as a member of the cabinet and as the MP for Werribee.

He said he had spent a decade as treasurer, 14 years as a minister, 18 years as an MP and 25 years in senior positions for Labor state governments, including a stint as chief of staff for then-premier Steve Bracks.

“It has been a great honour and a privilege to have had the opportunity to serve,” he said.

“Ultimately, there’s no great time to leave the great honour that is high public office.

“That time for me, I think, has come if I have to accept the basic proposition that I don’t have exclusive tenure on the role, that we do need to present the opportunity for renewal, a new treasurer, new perspective, new insights. All of those things, I think, are important and good governments know that they have to renew themselves.

Premier Jacinta Allan and Treasurer Tim Pallas announce his retirement on Monday.Credit: Gus McCubbing

“I don’t believe that I have any responsibility or any right to prohibit that opportunity for this government.”

Pallas thanked son Jack, daughter Grace and wife Karen, who he said was a strong supporter of his decision when they spoke about it last week.

“We were discussing it, and I said, ‘When do you think would be a good time for me to leave politics?’ And she said, ‘Five years ago’,” he said.

Pallas also thanked Premier Jacinta Allan for being open to his departure, acknowledging it was never easy for governments when MPs left midterm.

“[It has been] a 25-year friendship with the current premier, who I could say, without trepidation, I am absolutely thrilled and proud of the opportunity to serve in an incredible government that she leads,” he said.

“Really a sign not only of her values, but the strength of character to achieve all that she has in such a short period of time.”

Although Allan has publicly backed her treasurer, insiders say the relationship between their offices had been strained recently as they negotiated the budget process and last week’s economic growth statement.

Four government sources, speaking anonymously to detail confidential discussions, told The Age that repair had increasingly become a point of contention within the Allan government.

Pallas acknowledged these differences on Monday, but said they came from both he and Allan doing their jobs.

“Some of you may have noticed that there is a bit of tension between the premier and myself as we were landing these things,” he said.

“That’s what a good treasurer does. You’ve got to have creative tension, or you don’t create anything.

“I’ve always appreciated the fact that the premier has let me have that opportunity, let me speak frankly, candid and sometimes brutally about what needs to be done and sometimes, more often than not, I’ve been convincing and sometimes through my own lack of capacity, I haven’t been convincing.

Pallas has been on the Labor frontbench since 2006.Credit: Eamon Gallagher

“Maybe because the premier’s judgment at the end of the day has proven itself, through the way that the economic growth statement has been received, [that] she’s got better political judgment than me.”

Allan said on Monday that the three most difficult jobs during the COVID-19 pandemic had been premier, health minister and treasurer.

“It was an economic crisis as well and Tim understood really, really keenly – and I remember this well from those meetings that went late into the evening – the need that we had to have a focus on supporting businesses, big and small, through that period,” she said.

Allan also singled out the fact mRNA leaders Moderna and BioNTech had set up manufacturing and research facilities in Melbourne, as one of Pallas’ achievements.

“That is because Tim spotted this as an opportunity [and] worked so incredibly hard to secure that investment because it’s about supporting the health of our community as much as it is about supporting jobs as well,” she said.

“There is ... much to look back and say thank you, Tim, for that long period of service as treasurer.”

Pallas is Victoria’s longest-serving standalone treasurer. Henry Bolte managed the state’s finances for longer, but performed the role alongside his duties as premier.

Pallas’ 10th and final state budget revealed that the government was delaying more than 100 projects.

Allan and Pallas in parliament in October last year.Credit: Joe Armao

In a probe of the state’s reports for the past financial year, released last month, the Victorian Auditor-General’s Office said there was no “clear plan for long-term fiscal management” as government departments and agencies incurred another operating loss.

While Pallas has been seen as a loyal servant and trusted pair of hands over the state’s finances, Labor has increasingly been on the nose with voters. Last month, Opposition Leader John Pesutto overtook Allan as preferred premier for the first time. The poll was conducted before Pesutto’s loss in his defamation court battle with ousted Liberal MP Moira Deeming.

Pesutto has steadily eroded Allan’s lead as preferred premier since she took the helm last year from Daniel Andrews. A Resolve poll in October last year reported that Allan was preferred premier for 38 per cent of voters, compared with 19 per cent for Pesutto. By November this year, 30 per cent of voters preferred Pesutto, compared with 29 per cent who wanted to stick with Allan.

The most recent budget update revealed Victoria’s net debt was to hit $155.2 billion this financial year and $187.3 billion by June 2028.

Financial pressures forced the government to delay several key initiatives and played a role in its decision to walk away from a pledge to build a new Royal Melbourne Hospital and Royal Women’s Hospital at the Arden precinct. The budget also confirmed the Airport Rail Link would be delayed at least four years because of a stalemate over the design of the station.

Pallas defended Labor’s economic record and said the state’s economy had doubled over the 14 years he’d had responsibility for the portfolio in some form.

He said this showed Victoria had enormous capacity to grow its way out of its large debt profile.

“All the bad things that have come out of our budget position, they’re my responsibility, and I take full responsibility for them,” he said.

“The good things [are] because the premier has the vision and the leadership to have got us there.

Then-premier Daniel Andrews and Tim Pallas in 2018.Credit: Eddie Jim

“Please feel free to vent any frustrations you have and blame me for them. But be assured of this: at no stage ever did I lose sight of my responsibilities to look after the welfare of the Victorian people and never to employ austerity that is making my problems reflected in the balance sheets of families or businesses.

“We protected the Victorian economy by protecting people at the most fundamental basis.”

Pallas’ resignation will trigger a byelection in the seat of Werribee, where he fought off a strong challenge at the 2022 state election.

The Liberal Party was hoping to target the Labor stronghold at the next general election, scheduled for 2026, after it recorded a boost to its primary vote in 2022.

But the byelection means the opposition will be forced to contest the seat in Melbourne’s outer west earlier than expected. Pesutto has made it clear he wants his party to run candidates in every contest.

Pallas, 64, joins a long list of Labor MPs to depart in recent years, causing a shake-up of several senior positions.

As well as Andrews, the list includes former deputy premier James Merlino, former health minister Martin Foley, former police minister Lisa Neville and Martin Pakula, Jill Hennessy, Jaala Pulford, Richard Wynne and Luke Donnellan.

Pallas and Andrews had worked side by side on Labor’s frontbench since the 2006 election, and both held key leadership positions before, during and after the worst of the COVID-19 pandemic.

After Andrews quit, Pallas was part of a failed power play by his Socialist Left faction to maintain control of the Labor Party’s leadership and install him as deputy premier.

Public Transport Minister Ben Carroll, from the Right faction, was instead elected deputy unopposed as part of a last-minute peace deal.

In her first press conference as premier in September last year, Allan heaped praise on the long-standing treasurer.

“Tim has been an outstanding treasurer of this state,” she said. “He’s handed down nine budgets. Nine. That is no mean feat. He’s a great man.”

The Werribee MP oversaw his first budget as treasurer in 2015, but his time in charge of the state’s finances is a tale of two halves.

He was the economic architect of the government’s massive infrastructure program, including delivering the funding for Labor’s level crossing removal projects and the Metro Tunnel.

But that, combined with COVID-19 and the state’s strict lockdowns, has left the state burdened with enormous debt and serious cost blowouts on major projects such as the West Gate Tunnel.

Before he was an MP, Pallas was the assistant secretary of the Australian Council of Trade Unions and worked as chief of staff to then-premier Steve Bracks.

On Monday, Pallas said he had played a role in negotiating with two crossbench MPs as Labor had sought to form government in 1999.

Pallas won the state seat of Tarneit in 2006 and was immediately appointed to cabinet as roads and ports minister.

Pesutto said Pallas’ legacy would be one of enormous debt for which Victorians would pay the price for decades to come.

“It is a legacy of the highest taxes ... it is a legacy of the highest unemployment in the country,” Pesutto said.

“We’ve seen this Labor horror show before – one person goes, another replaces, and things only get worse.”

Pesutto said the byelection would be a tough contest, but hoped it would be a referendum on the Allan government’s “neglect” in the strong Labor electorate.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said Pallas had been key partner in encouraging economic growth.

“Tim’s sincere and proactive engagement with the business community has always been a hallmark of his approach,” he said.

“His open-door relationship with the Victorian chamber has allowed for honest and constructive conversations aimed at achieving the best outcomes for our state.

“We wish Tim all the very best for the next chapter.”

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