Victorian budget: election first, budget repair later

Victorian Treasurer Tim Pallas reviews the budget before his speech. Picture: NCA NewsWire / Ian Currie

It’s election first, serious budget repair later, probably much later.

The politics are transparent; address the neglect in the health system and tip $2.6 billion into the regions via the Commonwealth Games.

Never mind the financial distress the budget exposes, spend the next six months positioning Labor for the polls.

Health clearly matters, but the Commonwealth Games will provide a powerful political message in the regions which will impact more than a handful of seats.

It’s hard to see the justification for the spending.

The pandemic exposed two serious weaknesses in the Victorian health system, starting first with neglect in the public health budget, which helped trigger the flawed response to the 2020 pandemic breakout.

Then the Productivity Commission exposed how Victoria had spent less money per person running public hospitals, including at the start of the pandemic.

No other state provided less funding per capita in 2019-20.

Which was a fundamental shock given the years of rhetoric surrounding Labor’s support for the health system, it’s only defence then being that more spending didn’t necessarily equal better services.

While it’s true that the pandemic has added incredible pressure on hospital staffing, the lesson of the South Australian election is that an underfunded system can mean political death.

While South Australian Premier Peter Malinauskas used ambulances as a blunt political instrument, Andrews knows that so much of the ALP’s support is via the health care sector.

Thus the promise to train and hire up to 7000 new healthcare workers, most of whom they will expect to vote Labor in 2022 or 2026.

South Australian Premier Peter Malinauskas, centre, used ambulances as a blunt political instrument in the recent state election.

Labor’s largesse towards the public sector, principally through more hirings and big wage increases, is a key reason it won so handsomely in 2018.

Every budget document carried the headline of Putting Patients First, just to reinforce that this was a health budget first and everything else comes second.

The global pandemic was not Labor’s fault.

But its mistakes in 2020 have contributed to a terrible budget bottom line, one that will deliver net debt of close to $170 billion by the middle of 2026.

There are no signs in this budget that Labor intends to go hard and go early to address debt.

Instead, it has created the Victorian Future Fund to start addressing debt in the “medium term”, with the budget due to go back into surplus in time for the 2026 election.

No-one in government will be even thinking about 2026 so it’s hard to know how seriously the ALP is about meaningful budget repair.

Of course, few governments in the world have flicked the switch to debt reduction, although an environment of interest rate rises (off a low base) will intensify the medium term pressure.

The final budget initiative worth noting is that there will be a new hospital for Melton in Melbourne’s outer west among nearly $3 billion of new assets and upgrades.

Melton, surprise, surprise, is one of a large number of seats in traditional Labor areas the government fears could fall in the wake of the pandemic.

Election first, budget repair later.