Victorian Labor’s largesse comes back to bite it

Victorian Treasurer Tim Pallas is looking politically uncomfortable. It’s one thing to hide behind the words of the Reserve Bank governor but Philip Lowe doesn’t have to fight elections.

Yes, NSW was downgraded on Monday as well, but Pallas would much rather be managing the numbers in that state than the lockdown-ravaged economy that is Victoria. Ever since the pandemic took hold there have effectively been two pathways — the first fighting the virus, the second rejuvenating a wrecked economy.

The virus is under control but there is no certainty that the economy is in the same condition; Victoria’s budget numbers are terrible and taxpayers have to take the Andrews government on trust that it can chart a way forward. Pallas, who was a senior ­adviser to Steve Bracks in 1999, knows full well the potential downside of a Labor Party that wrecks an economy.

The Victorian Coalition reached back into the Cain-Kirner era on Monday in its rhetoric but you would have to have been at least 46 years old today to have voted in Jeff Kennett on the back of economic failure in the early 1990s. What the Victorian Coalition gets out of the S&P downgrading is yet another potential political building block in the crawl to the 2022 state election.

While the national economic numbers are looking better than they might have been, there is no guarantee that 2021 will be an easy ride for Victorian businesses, which will drive much of the ­recovery. Sure, there will be a lot of government money sloshing around Victoria for the next few years, but there are no guarantees that what the Andrews government is proposing will work.

Common sense says that the production of a workable vaccine should be the turning point, but no one really knows what the practical effect will be of the economy being shut down for months on end. Or how a radical realignment of the state’s key industries will unfold and what impact an ­increasingly grumpy China will have on tourism and foreign ­students.

Pallas’s core defence is  he had no option but to spend big-time and, with money this cheap, it was now or never. He is right on many fronts. For starters, the bottom line impact of the downgrading is ­negligible. The real impact is on political perception. But it wasn’t incumbent on the government to bloat the public service, lose control of major ­project spending or throw away $1.1bn on the East West Link road project.

This, after all, has been a government that has lived off windfall revenue gains and been addicted to spending. This can work in the good times, but becomes a noose in a trough. And it’s been one hell of a trough.