Andrews debt horror blamed on Covid, RBA
Two days out from Victorian budget day, Daniel Andrews and Tim Pallas are keeping a low profile.
The Andrews government is seeking to blame Covid and the Reserve Bank as it prepares to unveil a horror Victorian budget on Tuesday that is likely to see public sector jobs cut, infrastructure projects delayed and funding to not-for-profit community groups slashed in a bid to keep net debt below $200bn.
In contrast with previous years, there were no pre-budget media opportunities involving Daniel Andrews or his Treasurer spruiking new spending initiatives at the weekend.
Instead, Health Minister Mary-Anne Thomas held a low- key Sunday press conference at the Royal Children’s Hospital to encourage families to vaccinate their children against the flu.
Questioned over Parliamentary Budget Office analysis showing 372 government programs worth $17.2bn – including road maintenance, domestic violence and disability support – could be cut in Tuesday’s budget, Ms Thomas deflected, repeatedly saying the government would honour all promises made ahead of the November state election.
“The budget will be delivered on Tuesday, and you can join in then, as with other Victorians, in learning exactly what is in it,” Ms Thomas said when pressed on whether the programs – with funding due to run out on June 30 – will be axed. “We’ve been very clear with the people of Victoria that we’ll deliver on each and every one of our election commitments, but we’ve also been upfront that this will be a challenging budget.
“Of course, during the global pandemic, we were required to borrow money. We borrowed money in order to keep Victorians at work, to keep small business thriving, and to save lives.
“Now is the time to commence the payback of that money that’s been borrowed; Victorians would expect us to do nothing less.”
The Australian revealed last week that Covid-related spending would account for less than a third of Victoria’s projected debt levels by the end of the current financial year, and just over a fifth of the $165.9bn of net debt the state is projected to reach by 2025-26.
Those debt levels are widely expected to be scaled up in Tuesday’s budget, amid soaring inflation and an increase in the cash rate of 3.5 per cent in the past year.
Challenged over whether the bulk of the debt was the product of government mismanagement, Ms Thomas said: “Absolutely not. You cannot have a once in 100 year event for it to not have an economic downside. That’s what we’ve experienced, but we did the right thing at the time.
“We did what we were advised to do by the RBA and other economic commentators, and indeed we did what nations right around the world did. We invested to ensure people were kept in employment, that small businesses were protected, that lives were saved.”
In a bid to redirect blame for the debt levels to the RBA, the government has been backgrounding journalists regarding advice given by governor Phillip Lowe at the height of the pandemic that it was likely he would “never sign off on an interest increase” during his term, due to end in September.
Prior to the pandemic, the 2019-20 state budget had Victoria headed for $54.9bn in net debt by the end of 2022-23, following the government’s decision ahead of the 2018 election to double the state’s debt ceiling to $60m to fund infrastructure projects.
Opposition finance spokeswoman Jess Wilson said Covid debt accounted for only a fraction of the state’s net debt.
“When it comes to major project blowouts, we need to make sure we’re looking at how we can, across the board, rein in debt so we don’t get into a situation where those interest payments continue to go up day by day and we can’t fund essential services,” she said.
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