Top economists query Victorian government’s free public transport plan

The nation’s top economists have questioned whether the Victorian Labor government can afford its $320m free public transport offering, warning it should be fixing its dire financial position rather than throwing around freebies.

Lily McCaffrey

Premier Jacinta Allan announces in Preston her free public transport policy for children under 18. Picture: Valeriu Campan

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The nation’s top economists have questioned whether Victorian Labor can afford its $318m plan to give children free rides on trains, trams and buses, warning that it needs to fix its dire financial position rather than throwing around freebies ahead of Tuesday’s budget.

The warnings came as Premier Jacinta Allan announced the state’s public transport would be made free for all children under 18 at an estimated cost of $318m over four years, while seniors would travel free on weekends, at a cost of $2.2m over four years.

Ms Allan did not specify how her government, which is forecast to hit net debt of $187.3bn by June 2028, would fund the budget sweeteners but insisted it was making “responsible decisions” in line with its fiscal strategy that includes achieving an operating surplus, stabilising and then reducing net debt.

Judo Bank economic adviser Warren Hogan questioned whether the state could afford the measures and whether they would lead to increased taxes.

Young and elderly Victorians could benefit from free public transport.

“I’m sure there’s a nice rationale, be it an economic or a social one, but the issue I would have thought for Victoria, which has probably some of the weakest government finances of any of the governments of Australia, is can they afford to be doing this or is there going to be some sort of offset in the budget next week, i.e. are they looking to raise taxes?” Mr Hogan said.

“One of the problems that Victoria has is that they are seeing the detrimental impacts of increasing taxes, specifically around property.

“I would have thought that the priority for the Victorian government at the moment is how to reduce the tax burden, and therefore how to minimise spending and definitely only provide new spending initiatives that are an absolute priority.”

Independent economist Saul Eslake said for a government that ought to be aiming for a cash surplus, $320m was “a lot of money to be throwing around, however worthy the objective might be”.

“It’s not the sort of thing that I would have expected a government under significant financial pressure, at risk of having its credit rating downgraded again, it’s not what I would have expected a government in that position to be doing,” Mr Eslake said.

“What they ought to be charting is a credible path back to a cash surplus, say by 2028- 2029.”

Chris Richardson says the policy should not be the government’s priority.

Independent economist Chris Richardson said while it was important to make public transport affordable, it was “absolutely not the first priority for a government which is struggling with its finances”.

Opposition Leader Brad Battin echoed the economists’ concerns and said the cash splash was “irresponsible”.

“Anything that supports the cost-of-living crisis in our state is always going to be something that many families would welcome … but you can’t do this at the expense of putting a tax on every single household, every single business and every single farmer,” Mr Battin said.

“Money doesn’t grow on trees, and nothing’s for free.

“It comes out of the pockets of hard working people here in Victoria.”

Ms Allan defended the free public transport policies on Sunday, which she said would provide “meaningful support” for families.

“You back in working people and families when they are looking to governments to provide real cost-of-living help right now,” Ms Allan said.

Victorian treasurer Jaclyn Symes will deliver her first budget on Tuesday. Picture: Angelica Snowden/The Australian

As Victorian Treasurer Jaclyn Symes prepares to deliver her first budget on Tuesday, S&P Global Ratings last week warned the state risked another credit rating downgrade should it fail to show “fiscal discipline”.

“What we will be looking for in the next budget is the state’s commitment to controlling operating costs and stabilising debt levels,” Rebecca Hrvatin, an analyst at S&P Global Ratings, said on Thursday.