Debt dive the right course, says Daniel Andrews

Victorian Premier Daniel ­Andrews has cited record low ­interest rates, the pandemic and the need to invest in long-term infrastructure as he defends the state budget.

Victorian Premier Daniel Andrews. Picture: David Geraghty

Victorian Premier Daniel ­Andrews has cited record low ­interest rates, the “one-in-100-years” pandemic, and the need to invest in long-term infrastructure as he defends the state budget set to be handed down on Tuesday, which will put Victoria on a trajectory to net debt of $154.8bn by 2023-24.

The state’s debt projection compares with a forecast net debt of $104bn in NSW by 2024. As of July 1, 2019, NSW had net debt of $8.8bn, while Victoria had net debt of $29.3bn, largely due to the Andrews government’s decision ahead of the 2018 election to borrow $25.6bn to help fund infrastructure projects including the North East Link road project, Airport Rail Link, and level crossing removals.

Asked on Monday whether he was concerned the grandchildren of the current generation would be left to pay the debt, Mr ­Andrews said his government was following Reserve Bank governor Philip Lowe’s advice to ­invest, with three-year government bonds at 0.2 per cent.

“Borrowing costs are ­extremely low. Now’s not the time to try and run surpluses. Now’s not the time to have a budget approach that fundamentally ignores that (the coronavirus pandemic) is a one-in-100-year event,” he said.

“I’ve been very clear for months now that we would use the strength of the Victorian budget to protect household budgets, and that’s by creating confidence, demand, jobs, and making sure that we’re building projects that matter. So there will be substantial borrowings, there will be substantial deficits.

“This is a one-in-100-year event, and the only way that that debt will be repaid, the only way that families will get through this, and businesses, is if we get the economy growing again and that’s what tomorrow’s budget is all about: a big plan for jobs, as well as, in the main, borrowing not just to deal with the fact that revenue has been hit really hard, but borrowing to build the things that our children and grandchildren will benefit from.”

Mr Andrews listed a $5.3bn ­social housing package forecast to create 40,000 jobs, $869m in mental health initiatives and a $2.2bn investment in early works on the suburban rail loop as key initiatives from which future generations would benefit.

Other significant spending commitments flagged by the government ahead of the budget ­include $797m in initiatives to help Victorians cover the costs of their power bills, and $155m for an institute of infectious diseases.

Late on Monday the government also revealed it would be putting $75m towards building a hospital in rapidly growing Melton on Melbourne’s northwest fringe, as well as establishing a $200m metropolitan health ­infrastructure fund and granting the existing regional health infrastructure fund an additional $120m.

Opposition Treasury spokeswoman Louise Staley said the budget needed to help Victoria rebuild. “We’re clearly behind the eight ball because we were closed down for so much longer than every other state,” Ms Staley said.

“Of course there’s going to be a deficit, and of course we support spending on projects, infrastructure and other projects now, that will get people back in work … but my concern is that the sort of things that government’s talking about are not about getting Victorians back to work in anywhere near the next year or two. Suburban rail loop won’t start for a couple of years.”