As Victorians face a state debt interest bill so big it risks crippling generations to come, it’s pretty obvious Jaclyn Symes, Jacinta Allan — and Dan Andrews, for that matter — never read John Brumby’s political memoir, The Long Haul.
All three should be forced to sit down and read out loud chapter nine, entitled “The Triple-A Matters”, which serves as a lesson for these modern profligates about how a Labor treasurer and premier should — must — run a budget.
Because Symes delivered a budget on Tuesday laden with increasing debt, a soaring interest bill and spiralling public sector costs. Rampant departmental spending continues, blowing budgets across health, education and pretty much every area of government, the budget reveals.
It makes for grim reading; in 2028-29, debt will reach $194bn (likely to be $200bn-plus in 2030) and our interest bill will hit $10.5bn. Critically, interest as a proportion of revenue will average 8 per cent a year. In other words, for every $10 earned by the state, 80c will be spent servicing interest on debt.
The state is in a debt dive and this budget is devoid of structural reform and heavy on political spin. This is a government that has turned its back on budget repair and the entire nation will pay a heavy price. And what of promised public sector job cuts?
The budget reveals the wages bill will keep rising above last year’s budget forecasts, hitting $42bn in the forward estimates. Spending across education, health, energy and justice is forecast to reduce marginally or slow, but how can we be expected to trust these numbers?
Brumby, a substantial Labor figure who was both treasurer and premier from 2000 to 2010, opens the chapter in his 2015 book posing some fundamental questions that are even more relevant in the wake of Tuesday’s budget than they were a decade ago.
“Does the Triple-A credit rating really matter?
“Australia needs more infrastructure, so why don’t we just borrow more, and build more?
“If we lose the Triple-A and have to pay a bit more in interest – does it really matter?”
For the sake of Victorians (in fact, all Australians), let’s hope Symes and Allan read how Brumby answers these questions about the triple-A, a measure that helps determine how much debt costs.
“To all three questions … my answer has been the same: the Triple-A matters. It matters for the creditworthiness, and hence borrowing costs, of the state; for the discipline it places upon the government; and for what it says about our performance in what is, in many ways, the engine room of any government, the Treasury.”
By Brumby’s measure, the Andrews-Allan governments have been failing Victoria since December 2020 when the state lost its triple-A and was downgraded two notches to AA.
It was the pandemic’s fault, Labor leaders protest.
The truth is different.
While Victoria did sustain economic damage during the lockdown years, Labor had already embarked on a debt binge after winning the 2018 election. And after the pandemic was over in 2022, the spending escalated again and hasn’t stopped as Andrews and Allan dug in behind the unfunded Suburban Rail Loop that will cost at least $125bn.
Labor’s pandemic blame game is exposed as little more than a political cover story by none other than Symes – now in charge of managing the state’s debt – in a pre-pandemic statement to parliament on May 28, 2019.
Standing in the upper house, she hailed the fact credit agencies had confirmed Victoria’s triple-A rating, saying it was a testament to “our prudent economic management and fiscal discipline”.
She went on to confirm Labor was “making the most” of the strong credit rating and low interest rates to embark on what history shows was a catastrophic debt-fuelled political strategy.
“It’s an opportune time to invest in transformational infrastructure projects,” she said.
“Rather than sitting idle, we believe in using our balance sheet to build, grow and leave a positive legacy. That’s why we are increasing borrowing over the medium term.”
Six years on, the twin justifications for this strategy are no longer true; Victoria has lost its triple-A rating and debt is no longer cheap as global interest rates rise.
Shamefully, Symes failed to even mention the triple-A in her budget speech. In all the thousands of words she wrote, the Treasurer couldn’t find the honesty to mention Victoria’s credit rating. Mind you, she did reveal she was off to New York soon to meet with the credit rating agencies. Let’s see how that goes. It’s likely the agencies could further downgrade the state, sending the cost of loans soaring even further.
In “The Triple-A Matters”, Brumby lays out exactly why a spendathon political philosophy is so dangerous to the future of an economy like Victoria’s and carries such great long-term risks for the population, including deteriorating basic services and capital flight and slower growth.
“The Triple-A still matters,” he writes. “There is a big difference between what a state government marked Triple-A will pay for debt, and what will be paid by one marked down to Double-A or even B. Every household budgeter knows that money not paid in interest can be put to other uses.”
Brumby’s book was published just as Andrews (who was a senior minister in the Bracks-Brumby governments) was getting started as premier and, based on where he left the state, it’s unfortunate that he seems not to have read it either, particularly page 120.
Brumby writes the fiscal discipline of a locked-in triple-A allows more spending on “nurses in hospitals and more teachers in classrooms without increasing taxes” and “that’s one way the Triple-A matters on the ground”.
“The Triple-A also serves government in another way,” he writes.
“There are innumerable calls upon the public purse. An infinite number of worthy causes cry out for funding. At some point a line must be drawn, and to draw a line you need a measure. The Triple-A services as such: it allows a government to prioritise projects within clear limits; and it helps to define what we mean by ‘breaking the budget’.”
Symes and Allan must read Brumby’s book for the sake of not just Victoria but Australia. Andrews should be made to read it as some form of retrospective punishment. And if they can’t find a copy, they can borrow mine.
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