Report reveals Victoria’s budget blowout
Victoria’s net debt increased by $24bn — or 25 per cent — in the year to September 30.
Victoria has posted a $2.5bn deficit for the first quarter of the current financial year, meaning the state is already more than halfway to the $4bn deficit forecast in the May budget for the full 2023-24 financial year.
The state’s quarterly financial report also shows net debt increased by $5.5bn in the September quarter, meaning that if Victoria continues to spend at the same rate for the rest of the financial year, net debt will hit $137.2bn by June 30 — $1.8bn worse than the $135.4bn predicted in the May budget.
Despite this, the report predicts net debt will actually be lower than previously forecast, reaching $133.8bn by June 30.
“Caution needs to be taken in interpreting and projecting the potential annual outcome for the full year from this quarterly result, due to the significant impact of the uneven recognition pattern of various major revenue items. These include land tax, the Fire Services Property Levy, commonwealth grants and dividends and grants from public corporations,” the report states.
The Allan government quietly tabled the report in state parliament on Friday afternoon, in what appears to have been an attempt to avoid scrutiny.
In the year to September 30, net debt skyrocketed from $96.5bn to $120.6bn, representing a 25 per cent increase.
Victoria’s total expenses for the three months to September 30 reached $23.1bn — an increase of $1.8bn compared with the same time last year.
The report attributed the extra spending to an “increase in other operating expenses of $1.1bn”, including the $380m Victoria will pay to the Commonwealth Games Federation as compensation for cancelling the event.
Total liabilities increased by $10.4 billion to $214.8 billion over the quarter, with the report blaming “higher borrowings to fund the government’s infrastructure program and to fund the operating deficit for the quarter” for the hike.
The blowout in spending comes as the government’s controversial Covid debt levy has already raised $164 million in the three months to September 30.
Coupled with strong workforce participation, the payroll tax component of the Covid levy helped to lift payroll tax revenue by $366m compared with the same time last year.
However, this was more than offset by a $506 million decrease in stamp duty, which the report largely attributes to rising interest rates, which have seen fewer houses sold, at lower prices.
Under the Covid debt levy, businesses operating in Victoria with national payrolls of more than $10m are required to pay an extra 0.5 per cent in payroll tax for the next decade, with those with payrolls of more than $100m on the hook for an extra one per cent.
The land tax component of the Covid levy requires property investors to pay an additional fixed charge starting at $500 for landholdings between $50,000 and $100,000, $975 for landholdings above $100,000, and an additional 0.1 per cent every dollar above $300,000.
The Covid levy is expected to raise $31.5bn over the next decade — a fraction of the $171.4bn in net debt which Victoria is forecast to accrue by June 2027.
The report blamed high inflation and rising interest rates for contributing to rising cost-of-living pressures for some households, which in turn has seen consumer spending slow.
A moderate fall in housing investment was attributed to labour and materials constraints, with workforce participation at a near record high, and the unemployment rate at a historic low of 3.5 per cent in September.
An increase in the state’s population of 2.4 per cent in the year to March — largely due to a post-pandemic recovery in net overseas migration — has underpinned much of the state’s economic growth.
An Andrews government spokesman said the state’s economy was strong, “jobs are at near-record highs and our fiscal plan is on track.”
“We are the only state or territory with a Covid debt repayment plan — paying back the emergency credit card while we continue to grow the economy and jobs,” the spokesman said.
Opposition treasury spokesman Brad Rowswell said the report showed that during the September quarter, government spending increased by $1.8bn while tax revenue increased by $366m, with Victorians now paying the highest taxes per person of any state.
“As Victorians tighten their belts, Labor continues its waste and spending spree,” Mr Rowswell said.
“It’s learned nothing, as the $600m Commonwealth Games debacle has showed. Under Labor, Victoria is broke and Victorians are paying the price for its incompetence.”
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