Victoria’s debt won’t reach $200bn but its annual interest bill is in danger of hitting $10bn

Treasurer Jaclyn Symes has assured Victorians state debt will not crash through the symbolic $200bn barrier in Tuesday’s budget amid signs the state’s annual interest bill is in danger of hitting $10bn.

Victorian Treasurer Jaclyn Symes and Premier Jacinta Allan. Picture: NewsWire / David Crosling

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Treasurer Jaclyn Symes has assured Victorians state debt will not crash through the symbolic $200bn barrier in Tuesday’s budget amid signs the state’s annual interest bill is in danger of hitting $10bn.

Ahead of releasing her first budget on Tuesday morning, Ms Symes insisted the Allan government was “fiscally responsible”, and refused to rule out significant job cuts to the public sector.

Asked if state debt – currently sitting at $155bn and forecast to grow to $187bn by 2028 – would reach $200bn in Tuesday’s forward estimates, Ms Symes said on Monday: “The aggregates will be revealed tomorrow … they will not start with a two.”

Budget figures reveal that as the state’s debt has spiralled off the back of the government’s blown-out and unfunded mega-infrastructure projects and pandemic-related spending, the interest bill to service it is devouring more and more revenue that could be used for basic services.

The 2019-20 budget reveals just $2.2bn was spent servicing the state’s debt and by 2023-24 this had risen to $5.7bn, with last year’s budget forecasting a rapid rise to $6.5bn, $7.5bn and $8.4bn over the next three years, before reaching almost $9.4bn in June 2028.

Adding to concerns that the annual interest bill will be forecast to reach $10bn in Tuesday’s budget is the prospect Victoria faces a debt cliff in 2029 when about $14bn in debt is due to be refinanced. With debt becoming more expensive on global markets it’s likely the new rate applied to this $14bn will be substantially higher than at present, sending the state’s interest bill soaring.

Opposition Treasury spokesman James Newbury questioned how much weight could be given to the Allan government’s assurances that forecast debt by June 2029 would remain under $200bn.

“I think every Victorian can be pretty confident that whatever the government reports in this budget will be under what the net debt actually reaches,” Mr Newbury said.

“If the government manages to report $199.9bn in debt through some accounting trick, that doesn’t make them clever, it just means it’s another deceptive way they’ve hidden the true state of the debt.”

Mr Newbury said Victorian taxpayers were paying more than $1m an hour in interest for the debt.

“The more you pay in interest, the less services you can give people and deliver to Victorians,” he said. “We are drowning in debt in Victoria.”

Mr Newbury said the government was “deceptive” in the way it reported its budgetary figures, and pointed to the $600m projected operating surplus it announced on Monday – $1bn less than it predicted six months ago in its December budget update – as an example.

“The government has promised to save money each and every year they’ve been in government, and on average, they’ve overspent by $14bn a year, which is a total of $130bn over the last nine years,” he added.

Ms Symes said the $1bn forecast operating surplus discrepancy came as the result of “decisions that we took to put Victorians first to ensure that the cost-of-living pressures that families are experiencing are indeed supported by a government that cares”.

“We could have elected to have a larger surplus in tomorrow’s budget, but what we did is choose to back Victorians,” she said.

“We know that cost of living, frontline services, these are the priorities that Victorians expect a Labor government to get behind. So we are investing in health, mental health, education, transport, all of the things that Victorians want.

“In relation to future surpluses, we’ll be looking at about an average of $1.9bn surpluses going forward. I intend to stick to that, or indeed do better.”

Ms Symes insisted the government was “committed to a responsible fiscal strategy” and pledged that Tuesday’s budget would not contain any new taxes.

The Treasurer said the budget would include “the start of savings measures” informed by the outcome of an interim review into inefficiencies in the state’s public service.

While Ms Symes has previously said she expected the review to result in the axing of 2000-3000 public service jobs, she said the budget would not contain the specifics.

“It will not be exactly evident about the jobs that will go tomorrow, because we want to make sure that we’re having those discussions with department secretaries and how they’re going to implement some changes across government,” Ms Symes said.

“We are anticipating a several thousand reduction in VPS staff.”