Victorian budget: Bonkers to think debt no longer matters

Victoria’s budget was so bad by conventional standards it almost defies assessment along the usual lines.

Unless Queensland, still to bring down a budget, bests it in December with something bonkers, Victoria will become flag-bearer of “Covidnomics” down under, where debt doesn’t matter and feelings govern policy.

It wasn’t so much the headline increase in net debt, which was extraordinary, to be sure: almost tripling over the next three years to $155bn.

NSW, a more populous state, is on track for $104bn in net debt over the same period.

The Victorian public sector wage bill is set to swell 9.5 per cent this financial year, more than twice as fast as expected in NSW. The net worth of the nation’s second-largest state is on track to collapse from $156bn to $103bn in four years, while in NSW net worth is on track to increase by $20bn over the same period. Unlike in NSW, where the groundwork for a historic land tax stamp study swap is being laid, there were no plans for tax reform whatsoever in the Victorian budget.

Generous stamp duty exemptions for properties up to $1m will, as in other states and territories, simply shift purchases forward in time and provide a housing subsidy to public servants on six-figure salaries, alongside a $500m Homebuyer Fund to chip in with the deposit.

“More and more things will be produced locally and proudly stamped ‘Made in Victoria’,” Treasurer Tim Pallas said 120 years after federation of the colonies, announcing $60m to support Victorian manufacturing.

That’s a entree next to the $2bn Breakthrough Victoria Fund, that will support 15,700 jobs over 10 years.

In a bygone era it was thought governments couldn’t “create jobs”, except by swelling the public sector with dubiously productive roles. Not any more. Victoria’s JobsPlan, the centrepiece of the Victorian budget, will “sustain 125,000 jobs” and add $44bn to state output over the next four years.

Even though COVID-19 tends to kill men in far larger numbers, the budget has a distinct focus on helping “all Victorian women, including Aboriginal women, culturally diverse women, LGBTIQ+ women, women with disability, young women, and older women”.

There was $170m “to make free or low-cost kindergarten programs available, $30m “for a range of gender-equality initiatives”, and $10m to “support innovative early stage start-ups founded by women”.

Overall it was blizzard of new spending proposals that can’t have passed a hard-headed cost-benefit analysis.

We shouldn’t single out Victoria too much, it is after all part of the Zeitgeist which has seen conventional economics junked in favour of Covidnomics everywhere. This is just the beginning.