Victorian Labor’s basket case of its own making

Victorian Premier Jacinta Allan. Picture: NCA NewsWire / Luis Enrique Ascui

Labor has woven its own fiscal basket case.

The budget crimes of the Victorian government don’t lie with its Covid-era assistance. They lie with Labor’s refusal to address the fundamental structural problems once the pandemic crisis had passed.

The cabinet razor gang needed to get down to business the moment the worst of the pandemic passed. But, of course, this didn’t fit with modern Labor’s way of doing business. Instead of cutting, it massaged the numbers, increasing the debt crisis rather than confronting it head-on.

The business strategy is very simple: spend big, pour concrete and bribe voters. The problem with this view is that it is quietly destroying Victoria as a nationally competitive entity; ballooning debt and taxes, surging fees and fines and a major projects agenda that has more blowouts than a WeightWatchers after-party.

Add to that rising public wage costs, a looming debt refinancing cliff and a workers’ compensation scheme that recorded an $11bn premium deficit over five years.

Thank God for Auditor-General Andrew Greaves. His take-down of Labor’s fiscal strategy, which is built in part on the belief that, ultimately, Victoria will grow its way back to prosperity, tells the narrative absent from the budget papers.

“If it continues to grow at this pace, the cost of servicing debt will compound this fiscal challenge,’’ he warns. “The government have not laid out a plan for when and how the state will pay down existing and future debt.”

Deeper in the report he goes even harder: “There is presently no indication, based on the current budgetary horizons of when and how the state will be able to start to pay down the debt that it has and plans to accumulate.

“Several other emerging financial risks require close attention to manage longer-term financial sustainability. If these challenges are not adequately managed, further additional unplanned debt may occur or announced government priorities may need to be curtailed.”

It’s kind of obvious if you understand the history.

Treasurer Tim Pallas told parliament his last budget was about pursuing a growth strategy with stabilised debt but this assumes growth will get Victoria there in the end. And we don’t know when the end date is.

The problems are fuelled by a massive major-projects agenda that is helping add to the nation’s inflationary challenges.

Confused?

Labor’s re-election strategy in the next three years is built on the belief that its so-called Big Build will lead the way because some of the key projects will open either in an election year or earlier. So new Premier Jacinta Allan will spend a lot of her time cutting ribbons.

Meanwhile, the state will be groaning under tax increases and service delivery cuts just so the government can keep its ship afloat.

The Labor argument is that young people don’t care about debt and so long as the public sector is fed and watered, the government will keep getting re-elected.

Never mind that the fiscal settings are wrecking the joint.

If Andrew Greaves is right, the worst might be yet to come.