‘$7m at risk’: Victorian Treasurer Tim Pallas’ slush fund failures revealed
A secretive investment fund run by Tim Pallas is facing big losses — and the Treasurer is refusing to say which deals are collapsing.
Eleven loans authorised by Victorian Treasurer Tim Pallas from a secretive investment slush fund run by his office are in danger of going belly up, leaving taxpayers $7m out of pocket.
The Australian can reveal the recipients – who the Treasurer is refusing to identify – are at risk of defaulting on the taxpayer-backed loans made via the Treasurer Guaranteed Loan fund.
Mr Pallas’s office has confirmed the 11 borrowers are in potential default on the loans but has refused to release the entities’ names or detail the projects.
About 70 loans have been made through the TGL and the bulk of these are to bankroll social housing and suburban sporting facilities. “These loans have been guaranteed to get social housing and community sports infrastructure built sooner and more easily in partnership with community organisations,” a government spokesman said.
Operating as an investment vehicle under the control of the Treasurer, the TGL loan book has ballooned from $178m in 2017 to more than $1.6bn in 2024. And in a move criticised on Thursday by former Liberal treasurer Michael O’Brien, as the size of the TGL fund surged in the past seven years a cloak of secrecy has been thrown over its operations and borrowers are no longer identified.
In 2017, the entities that received the TGL backing were itemised in TCV reports. This is no longer the case. The Treasurer’s office has also refused to answer The Australian’s request for the interest rate and repayment terms of each of the 70 loans, including the ones facing potential default. The Treasurer’s office defended this lack of transparency, saying because the TGL loans were an “insignificant” amount of overall Treasury Corporation of Victoria loans (TCV loans in 2023-24 totalled $157.5bn) there was no need to provide a breakdown.
“Treasurer guaranteed loans represented 1 per cent of total TCV loans in 2023-24,” the government spokesman said. The Treasurer’s office has also defended the performance of the TGL fund, pointing out that the $7m at risk of default constituted just 0.4 per cent of the overall loans of more than $1.6bn.
The TCV 2023-24 annual report provides only broad details of the projects, including $547m to nine projects linked to affordable housing developments, $67m in community infrastructure loans to 14 councils, $90m in sports and recreation infrastructure projects run by 20 councils, and $15.4m in research and developments grants to 29 small- to medium-sized businesses.
The biggest loan guaranteed by Mr Pallas’s TGL fund was a $1.2bn loan in 2019 to AquaSure, the operators of Victoria’s desalination plant in Wonthaggi on the Gippsland coast.
“The Allan Labor government is now acting as a lender of last resort with taxpayers’ money,” Mr O’Brien said. “This is the same appalling financial mismanagement that cost Victorians hundreds of millions through the VEDC under Cain/Kirner. Treasurer Pallas must come clean on who defaulted on $7m of taxpayer-backed loans. Victorians are cleaning up this mess and we deserve to know who has benefited. Why did the Treasurer personally guarantee these loans?
“The lack of transparency from Victorian Labor is just another sign that Labor can’t manage money.”
The $7m loan debt emerged just days after The Australian reported that Victoria was confronting an $86bn “debt time bomb” that will start detonating in four years, increasing the state’s already crippling interest bill by billions of dollars and making it even harder to fund basic health, education and transport services. Treasury figures confirm the debt crisis will deepen between 2029 and 2034. TCV figures reveal during this five-year period, about $86bn of state debt must be refinanced, and with the cost of borrowing soaring on global markets, the state’s interest bill will spiral.
TCV data shows the average interest rate for the $86bn debt is around 2.4 per cent, a historically low rate attributed to a wave of cheap money that swept the world triggered by the Covid-19 pandemic. TCV debt figures show $14.2bn will mature in 2029, $12.4bn in 2030, $16.4bn in 2031, $15.3bn in 2032, $15.9bn in 2033 and $12.4bn in 2034.
The global cost of borrowing money is rising, and interest rates on refinancing the $86bn could average around 4.5 to 5 per cent, increasing Victoria’s interest bill on just this parcel of debt – the state’s overall debt is projected to hit $228bn by 2028 – by more than $2bn. The Auditor-General last month sounded the alarm about Victoria’s finances and the Allan government’s “reactive” budget management.
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