Victorian budget: Difficult reality of Daniel Andrews debt disaster
The Premier has consistently blamed Covid for Victoria’s financial woes, but the state’s books tell a different story.
Covid-related spending will account for less than a third of Victoria’s projected debt levels by the end of the current financial year, and just over a fifth of the $165.9bn of net debt the state is projected to reach by 2025-26.
Foreshadowing “difficult choices” ahead of next Tuesday’s state budget, Daniel Andrews on Thursday talked up the pandemic as the key cause of the state’s financial woes.
But analysis of previous Victorian budgets, budget updates and financial statements demonstrates $25.3bn, or more than 40 per cent, of debt accrued by the Andrews government since 2019-20 is unrelated to Covid.
The situation is also set to get worse, with state debt projected to increase by another $49.9bn by 2025-26, amounting to an extra $75.2bn in debt accumulated in the six years from 2019-20 that was not part of the plan ahead of the pandemic, but is not Covid-related.
On its dedicated website for Covid-19 financial reporting, the Victorian Department of Treasury and Finance attributes a total of $35.8bn to “coronavirus-related costs”, including $4.4bn in 2019-20, $13.3bn in 2020-21 and $18.2bn in 2021-22.
The $35.8bn equates to 31 per cent of the $116bn of net debt the state was projected to reach by the end of the current financial year, according to November’s Pre-Election Budget Update, and 22 per cent of the $165.9bn the state is on track to rack up by 2025-26.
Prior to the pandemic, the 2019-20 state budget had Victoria headed for $54.9bn in net debt by the end of the current financial year, following the Andrews government’s decision ahead of the 2018 election to double the state’s debt ceiling to $60m to fund major infrastructure projects.Asked by The Australian on Thursday whether it was disingenuous to blame Covid for Victoria’s financial situation, Mr Andrews said: “No. Not at all. The only disingenuous thing would be to suggest that borrowing to build is the same as borrowing to save lives and save jobs. That would be a disingenuous thing.
“Covid debt, there’s no choice. We had to go and borrow to get through the most difficult of times, so for the best of reasons, lives and jobs, at the worst of times, we went and borrowed very substantial amounts of money.
“That was absolutely an essential thing, and now it is essential that we lay down a plan to pay that money back, and that will be a feature of the budget next week.”
Mr Andrews denied choices his government made ahead of the pandemic had put Victoria in a more vulnerable financial position. “No, no. We went to the election in 2018 with a clear plan to borrow more to build more, and just as future generations will make a contribution to paying off things like road and rail, hospitals and schools, they’ll benefit from that.,” he said. “That makes the economy bigger.
“Covid debt’s a bit more like a credit card, and we have to get that balance back down to zero, so that if there’s something else comes at us, we’ve got capacity to cope, or more positively, if a big opportunity presents, we’ve got the capacity to seize that. That’s what the budget will be about.”
Some of the expenditure included in the $35.8bn of Covid costs is likely to raise eyebrows, including $690m for the government’s “big housing build”, $110m for $250 “power saver” vouchers for households and $94m for community sport.
Other initiatives classified as “Covid” spending include $67m on solar homes, $38m on other clean-energy projects and $30m on “industry energy transformation”.
Mr Andrews reiterated that Tuesday’s budget would deliver on his government’s election promise of a surplus over the forward estimates, conceding that amid soaring inflation and a 3.5 per cent rise in the cash rate since last year’s budget, it would involve tough choices.“It does involve some challenging decisions, some difficult decisions. None of them are made lightly, but they are the right thing to do, and we’re not here to be popular,” the Premier said. “As I’ve made very clear over a long period of time, we’re here to do what matters, we’re here to do the right thing, and just kicking that down the road and pretending that the Covid borrowings that were emergency borrowings – we simply had to do it – aren’t real, pretending that that’s not an issue, that is not the leadership that I offer.”
Victoria’s rising debt levels come despite forecast tax revenue of $31.1bn for 2022-23, which is $3bn or 11 per cent higher than the $28.1bn predicted in the 2019-20 budget.
A key contributor to the debt is the ballooning public service wage bill, which at $33.4bn for 2022-23 is $7.2bn or 27 per cent higher than the $26.2bn forecast for in the 2019-20 budget.
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