Victoria has ‘every right to be grumpy’ but doesn’t warrant bail out, economists say

The Albanese government should not prop up Victoria with a deal that disadvantages other jurisdictions, economists have said, after Premier Daniel Andrews lobbied for more Commonwealth funding in the lead-up to the May budget.

Victoria’s net debt is tipped to peak at $165 billion by 2025-26 when state Treasurer Tim Pallas expects to reach an operating surplus despite higher interest rates.

Premier Daniel Andrews has complained of being ripped off by the former Coalition government through infrastructure and GST carve-ups and has for weeks been warning Victorians to prepare for a tough state budget.

Asked by the media last week whether he was seeking a bailout from the federal government, Andrews said he wouldn’t put it in those terms.

“But we’ll always lobby, push, pressure, advocate and put a good quality case to the Commonwealth government for more and more support. You would expect nothing less,” he said.

On Tuesday, The Age asked whether Victoria was seeking funding for any particular projects. A state government spokesman said: “Victoria isn’t seeking any more than our fair share – which we were denied by the former Coalition government for far too long.”

Chris Richardson, a partner of Deloitte Access Economics, said he understood Victoria was asking for additional support but that the Commonwealth had already provided generous support to the state during its pandemic downturn.

“It never hurts to ask. [But] if I were Jim Chalmers, it would be a polite ‘no’,” Richardson told The Age on Tuesday.

“Victoria’s got every right to be grumpy about the stupid GST deal that Western Australia gets, but that doesn’t say ‘do a stupid Victoria deal’.”

Both Richardson and economist Saul Eslake said Victoria was also worse off because of its ambitious infrastructure projects that have suffered cost overruns, and now was a good time to make tough choices early in the four-year election cycle.

Eslake said he had some sympathy for the Victorian government’s position because of the “outrageous” GST carve-up and a shortfall in infrastructure spending for the state.

There was an argument for some additional support for the state, he said, despite believing that Victoria’s financial concerns were otherwise “largely a result of its own making”.

Now was the appropriate time to do the “nasty stuff”, he said.

“Whatever the federal government is inclined to do isn’t going to eliminate the need for Victoria to make challenging and unpleasant decisions,” Eslake said.

Federal Treasurer Jim Chalmers (left) and Victorian Premier Daniel Andrews.Credit: The Age

Following reports of the comments in the Australian Financial Review, federal Treasurer Jim Chalmers on Tuesday said all budgets were under pressure and the Commonwealth would do what it can to assist Victoria in next month’s federal budget.

“We work in a cooperative and collaborative way with Victoria, and with the other states and territories as well, to make sure that we are methodically working through these challenges … [and] that we’re funding and providing the services that the people we represent need and deserve,” Chalmers said.

Victorian opposition finance spokeswoman Jess Wilson accused Andrews of going cap-in-hand to Canberra instead of keeping major infrastructure projects on budget.

“We need to look at how we more efficiently run those projects,” Wilson said.

Public service bosses have already been asked to find savings by slashing staff numbers by as much as 10 per cent.

In the lead up to the November state election, Labor repeatedly accused the opposition of seeking to cut public sector jobs.

“Make no mistake – Victorian jobs are on the ballot,” Pallas said at the time.

On Tuesday, Health Minister Mary-Anne Thomas said no frontline jobs or frontline health programs would be cut, in an attempt to reinforce that all election promises would be delivered.

But Karen Batt, Victorian secretary of the Community and Public Sector Union, said that all health jobs – not just frontline ones – supported service delivery and that programs would collapse if back-of-house public sector workers were cut.

Victoria had teamed up with former NSW premier Dominic Perrottet to pressure the federal government to fund hospitals 50-50 with the states, which the Albanese government is yet to commit to while acknowledging the parlous state of the primary health system.

The federal budget will be handed down on May 9. The state budget will be handed down a fortnight later on May 23.

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