Tim Pallas sounds alarm: ‘Worse to come’ as $770m hole torn in budget

Coronavirus pandemic and the devastating bushfire season has double-punched a $773m deficit in Victoria’s budget: Treasurer.

Victorian Treasurer Tim Pallas addresses the media during a press conference in Melbourne on Friday, revealing Victoria's $773m budget deficit. Picture: AAP

Victoria’s Treasurer warned the worst was yet to come as he ­revealed the coronavirus pandemic and devastating bushfire season had double-punched a $773m deficit in the state budget.

It came as the state opposition ramped up a campaign on economic recovery, releasing a four-pronged plan to resuscitate the economy the day after calling for a $1bn boost to the local manufacturing sector.

The Victorian economy has been shattered by the coronavirus shutdown, with Tim Pallas on Friday revealing a $618m projected surplus was gone.

“Our No 1 priority is the welfare and wellbeing of Victorians,’’ Mr Pallas said. “We’re not chasing surpluses and we won’t deliver a surplus in this year’s budget.’’

Unveiling the March quarter ­financial report, Mr Pallas said the new deficit figure was an improvement on the previously projected $1.1bn blowout.

However, Mr Pallas said the state’s coffers were left wanting with the most recent bushfire ­period costing Victoria an estimated $500m as well as the more than $5bn spent fighting the corona­virus pandemic.

“There’s worse to come in terms of its impact,’’ he said.

Economic activity decreased by 14 per cent due to the COVID-19 shutdown, while the unemployment rate sits at 6 per cent, according to the March quarter financial report. But earlier modelling released by the Victorian government showed unemployment could peak at 11 per cent in the September quarter, with property prices tipped to fall by up to 9 per cent by the end of the year.

In terms of recovery, Mr Pallas said the Andrews Labor government would be taking lessons from economic reconstruction after WWII.

“You grow the size of your economy so you effectively get a much greater capacity to both repay debt and you repair your budget position quicker,” he said.

The Victorian government in April secured $24.5bn in emergency funding to respond to the coronavirus pandemic.

Opposition Treasury spokeswoman Louise Staley said the latest budget update painted a grim picture of the state’s economy.

“This result is $2.3bn worse than last year despite taxation revenue being up $262m for the year to date,” she said.

On Friday, the opposition ­released a plan to fix Victoria’s ailing economy, which highlighted personal financial security, rebuilding local economies, helping struggling communities and ­improving public safety.

The four-pronged plan, released jointly by the state Liberals and Nationals, urges the Andrews government to rule out new taxes, as well as freezing transport charges such as road tolls and public transport fares.

In addition, the opposition is calling for the threshold on payroll tax to be raised to $10m and for the government to deliver 10,000 new apprenticeships and traineeships by 2022.

Opposition Leader Michael O’Brien said Victorians were resilient and would get back to work as the economy recovered. “Our plan will kickstart our state’s economy and get Victorians back to work and back in business,” he said.

As well, the Victorian Liberals and Nationals are calling for greater investment in the state’s economy, focusing on supply chain diversification with investment targeted towards local businesses.