Victorian Premier Daniel Andrews says budget has long Covid debt

Premier Daniel Andrews has declared ‘now is the time’ to begin to repay Victoria’s massive debt, as he lobbies the federal government for extra funding.

Victorian Premier Daniel Andrews. Picture: NCA NewsWire / Aaron Francis

Premier Daniel Andrews has declared “now is the time” to begin to repay Victoria’s massive debt, as he lobbies the federal government for extra funding ahead of next month’s state and federal budgets.

Mr Andrews and federal Treasurer Jim Chalmers have both sought to blame the Covid-19 pandemic and the previous Liberal government for their respective budgetary woes, despite the ­Andrews government opting to double its debt ceiling to pay for a series of costly infrastructure projects long before the virus hit.

Economists and the state opposition argue much of Victoria’s debt – which greatly exceeds the debt levels of all other states and is projected to reach $165.4bn by 2025-26 – has been of the state government’s “own making”.

Confirming he had been in talks with Anthony Albanese about seeking “more and more” federal funding, Mr Andrews said on Tuesday: “Victoria isn’t seeking any more than its fair share, which we were denied by the former ­Coalition government for far too long.”

Mr Andrews indicated last week that state Treasurer Tim Pallas’s budget – due to be handed down on May 23 – would involve “a lot of difficult decisions”.

Last month Victorian Department of Treasury and Finance ­secretary David Martine wrote to government department heads, ordering them to cut their budgets by 10 per cent in a move the ­Community and Public Sector Union estimates will equate to up to 5000 jobs.

The move comes as the government announced last week it was increasing the public sector wage cap from 1.5 per cent to 3 per cent, amid pressure from unions for wages to keep up with inflation – and as the wage bill is set to soar to $35.8bn by 2025-26, up from $19bn in 2013-14 when Labor came to government.

“This will be a challenging budget, but leadership is doing what matters, leadership is doing not what’s popular, but doing what must be done,” Mr Andrews said, citing “emergency borrowings” during the pandemic as the cause of the debt.

“A lot of difficult decisions are going to have to be made, but they’ll be made consistent with our values, and consistent with the practical reality that now is the time to really lay down a plan to repay those emergency Covid borrowings. If we defer that, then we will compromise the whole show, and certainly compromise our capacity to respond to other challenges or to make investments and drive reform and deliver all the things that Victorians want and need.”

The state – which had Australia’s longest lockdowns – borrowed tens of billions of dollars to pay for pandemic-related initiatives. However, Mr Pallas had already locked Victoria into a debt binge, announcing on the eve of the 2018 state election that he would double the debt ceiling from $30bn to $60bn over the four years to 2022 to fund major infrastructure projects.

Debt that was projected to peak at 12 per cent of gross state product is now on track to reach 24.8 per cent by 2025-26, with multibillion-dollar blowouts on major projects including the West Gate Tunnel, Metro Tunnel and North East Link, and a prediction from the Parliamentary Budget Office that the Suburban Rail Loop could cost as much as $200bn to complete.

Grattan Institute transport and cities program director Marion Terrill said although there was a “set of Covid reasons” for Victoria’s debt levels, “there’s also decisions of government to commit to an enormous infrastructure construction program that we don’t actually have a way to pay for at this point”. “I’ve been pretty publicly critical of the Suburban Rail Loop because it’s just so gigantic and it was committed to without a business case,” Ms Terrill said.

“It’s going to be the most expensive transport project ever built in Australia, so that’s a very big, bold decision that they’ve started building and Victorians are paying for that out of borrowings.”

 

Asked on Tuesday whether he was willing to bail out Victoria’s state budget, Dr Chalmers said: “The Victorian budget is under pressure in the same way that the commonwealth budget is under pressure as well, and many states and territories are facing similarly challenging times when it comes to pressures on our budget.”

State opposition Treasury spokesman Brad Rowswell said the Andrews government’s “culture of waste has led to more than $30bn in cost overruns on major projects. Their addiction to taxes has meant 44 new or increased taxes … and their massive $165bn debt … means that each and every day Victorians are paying $10m just to service the debt’s interest.”