Victoria budget: Pollyanna view of coronavirus sees Treasurer take a big punt

Victorian Treasurer Tim Pallas. Picture: David Caird

Victorian Labor is turning the Treasury into the state’s second casino.

Crown by the Yarra has been gutted by the pandemic but Victoria will get a much bigger gambling house than it ever imagined to compensate for the hotel quarantine catastrophe.

The bottom line numbers in this budget are weepingly bad, certainly by pre-COVID-19 standards.

The effects of the virus and the quarantine failures bleed through the detail of the budget documents but they are not articulated in the government rhetoric.

This is part of a deliberate Pollyanna political strategy being backed by Labor to move forward at any cost, relying on rapid jobs growth and infrastructure spending to save the economy.

But the government cannot run from the budget reality.

The debt numbers are depressing, not to mention the sharply higher unemployment and diving tax receipts contributing to the worst budget books in the country.

It will take a long time to return to budget normal.

Labor is throwing tens of billions at a political problem with the desire to be judged not on what happened under its watch but what it can do to fix the problem.

Treasury is not buying Pallas’s political boosterism.

Virus assumptions

All through the budget papers are heavy qualifications that make Tuesday’s statement intensely conditional on the coronavirus being held at bay not only nationally but globally.

It assumes that any further localised outbreaks in Victoria and nationally are contained and do not lead to any further city or statewide restrictions.

Good luck.

It banks on a global COVID-19 and economic recovery over 2021 that will only be possible with a swift vaccination rollout.

These things may happen but they may well not, which is why there are so many qualifications; the doomsday scenarios are not even worth contemplating.

The budget is inevitably a political document and it is an intensely Labor framework to rebuild the state.

It is hard to argue against the need for massive investment in the Victorian economy and now is quite obviously a good time to borrow.

The government’s policy levers are all directed at getting people back to work, with a target of 400,000 new jobs by 2025, and it will be fundamentally judged by its ability to deliver on this target.

It is pumping nearly $30bn in output spending and $20bn in new and improved investments and this is part of an already booming infrastructure spend in Victoria.

Deloitte Access Economics estimates that the government’s expenditure and revenue decisions will cause a $44bn increase to gross state product over the forward estimates.

Labor ‘ruthless winning machine’

This will really worry the Victorian Coalition.

Whatever you might think of its failures, Labor is a ruthless winning machine in Victoria.

It already feels like the state has segued into the start of a two year election campaign, government advertising is on the rise and some of the historically significant infrastructure rollouts will — surprise, surprise — start to really kick-in during the pre-election phase.

At the height of the pandemic it was hard to feel anything but a deep sense of doom around the future of the Victorian economy.

Labor may yet circumvent a catastrophe by borrowing and spending.

But this won’t take away from the ghastly underlying numbers in the 2020-21 budget.

They are historically — hysterically — bad.