Pallas’ departure leaves Allan with mounting headaches

Treasurer Tim Pallas’ abrupt resignation from parliament means Premier Jacinta Allan must find a new economic manager to tackle the biggest debt pile in the state’s history, shuffle her cabinet and contest a byelection in a seat at the centre of cost-of-living concerns.

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, ending a career that spanned a quarter of a century in senior positions for Labor state governments, including 14 years as a minister and a decade as treasurer.

Premier Jacinta Allan on Monday with Tim Pallas, who has announced his resignation as treasurer.Credit: AAP

“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 … and good governments know that they have to renew themselves.

“Quite frankly, I don’t think my party needs me any more.”

Allan would not say on Monday who would take on responsibility for the state’s finances. As premier, she has final say on portfolios. She pledged the decision would be announced after caucus selected a cabinet replacement for Pallas at a meeting on Wednesday morning.

Six Labor insiders, speaking anonymously to discuss internal matters, said manoeuvring – for the role of treasurer and any other position that becomes available in a cabinet reshuffle – had already begun.

They speculated that Assistant Treasurer Danny Pearson remained in contention for treasurer but was not a hot favourite.

One source said there were various senior ministers who were perceived to be capable of the portfolio, including Health Minister Mary-Anne Thomas and Attorney-General Jaclyn Symes. Ministers Gabrielle Williams and Steve Dimopoulos were also being floated in some circles.

Whoever is named treasurer will face the difficult job of balancing the state’s budget as Victoria tries to return to its first operating surplus since before the pandemic.

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

Meanwhile, the premier is deliberating over how to manage the unavoidable reshuffle.

She was still considering whether to minimise cabinet changes this week by simply patching up the holes from Pallas’ departure and postponing a broader overhaul, the sources said.

The Labor sources said at least three candidates from the party’s Left faction – Nick Staikos, Gary Maas and Paul Edbrooke – could put their hands up for the empty cabinet seat.

They forecast a tight contest. It is not yet known if the Right faction will put forward an alternative.

In 2022, Pallas and a group of MPs who were part of the former National Union of Workers moved from Labor’s Right to the Left, years after their union had merged into the larger United Workers Union.

As part of that arrangement, NUW MPs believed they would be able to replace their allies in senior positions as they retired. Maas and Staikos both hail from this group.

Pallas’ retirement also means there will be a byelection in the seat of Werribee in Melbourne’s west.

Allan has justified not running a candidate in the coming Prahran byelection – triggered last month by the resignation of Greens MP Sam Hibbins – because the party did not already hold the seat. But Werribee is a heartland Victorian Labor seat and wrangling over preselecting a candidate is expected to begin soon.

Redbridge pollster and former Labor strategist Kos Samaras said the opposition had already targeted the seat.

He said there was a chance Labor could lose – though it would require a hefty 10 per cent swing on a two-party preferred basis.

“It is one of these sites you can describe as the epicentre of the cost-of-living crisis. The grievance there is significant,” he said.

“[The Victorian Liberals] have to start winning seats like that because the demographics of inner-eastern Melbourne is rapidly changing, and they need to find new homes.”

A new political party, the West Party, has vowed to take on Labor in the region and is considering its options about running.

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

The treasurer also thanked 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.

Although Pallas and Allan spoke highly of each other on Monday, Labour sources say the relationship between the offices of the premier and the treasurer had been strained recently as they negotiated the budget process and last week’s economic growth statement.

They pointed to an idea floated internally by Pallas to introduce a charge on working with children checks – which never progressed – as an example of a proposal that had caused contention.

One source said Pallas had initially sought to be moved to a different portfolio, avoiding the need for a byelection, before eventually deciding to quit politics.

On Monday, Pallas acknowledged these strains but chalked them up to both politicians doing their jobs and deferred to what he called Allan’s better political judgment.

Credit: Illustration: Matt Golding

“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.”

Allan said on Monday that the three most difficult jobs during the COVID-19 pandemic had been premier, health minister and treasurer. She also singled out the fact mRNA vaccine leaders Moderna and BioNTech had set up manufacturing and research facilities in Melbourne as one of Pallas’ achievements.

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.

Before entering parliament, Pallas was chief of staff to then-premier Steve Bracks.

On Monday, Bracks said Pallas could retire from politics watching as key projects from his time as treasurer opened to the public, including the Metro Tunnel, West Gate Tunnel and the new Footscray Hospital.

“That is the biggest, longest-lasting legacy that he will leave the state. It will be better off, better connected and much more liveable. That is a pretty good legacy to leave,” Bracks said.

In a probe of the state’s reports for the past financial year, 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.

Pallas defended Labor’s economic record and said the state’s economy had doubled over 14 years, showing Victoria had enormous capacity to grow its way out of its large debt profile while avoiding austerity.

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

He said the byelection would be a tough contest, but hoped it would be a referendum on the Allan government’s “neglect”.

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

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

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