Auditor General Andrew Greaves has sounded the alarm over Jacinta Allan’s Victorian budget crisis

Watchdog reveals there is no plan to pay down Victoria’s spiralling debt. Read his damning verdict now.

Victorian Premier Jacinta Allan and Victorian Treasurer Tim Pallas in parliament Picture: NCA NewsWire / Luis Enrique Ascui

Victoria’s budget has racked up an operating loss of $8.8b and the Labor government has failed to map out a plan to pay off ballooning debt, the state’s financial watchdog has revealed.

In a damning verdict on the state’s budget, Auditor General Andrew Greaves has predicted

Victoria’s total gross debt will spiral to $256 billion by June 30, 2027, as he issued a dire warning about the financial future of the nation’s second biggest state.

The auditor-general’s annual financial report for 2022-23, tabled in parliament on Friday, has put the Allan Government on notice over the health of the state’s books.

While Victoria had posted a surplus of $4.3b during the year this was only possible because of a $7.9b dividend from VicRoads, meaning the underlying operating cash deficit was in fact $3.6b, the report found.

The general government sector’s operating loss from transactions of $8.8b was the fourth year in a row of operating losses, bringing its accumulated losses over this period to $43.7b.

“These losses erode reserves and reduce the state’s financial resilience,” the report states.

“Returning to a surplus will require significant fiscal discipline to manage rising costs and deliver previously announced cost-saving initiatives.”

The watchdog’s 92-page warned that debt was spiralling “again this year at a pace faster than revenue and economic growth” and “if it continues to grow at this pace, the cost of servicing debt will compound this fiscal challenge”.

Former premier Daniel Andrews and Treasurer Tim Pallas. Picture: Tony Gough

Among the report’s most damaging findings for Premier Jacinta Allan and Treasurer Tim Pallas was its assessment that “the government have not laid out a plan for when and how the state will pay down existing and future debt”. The report also blows a wider hole in the financial record of former premier Daniel Andrews.

“Several other emerging financial risks exist requiring close attention to manage financial sustainability,” the report states.

The auditor-general’s report follows the release earlier this month of the September quarter budget result which revealed Victoria has posted a $2.5bn deficit for the first quarter of the current financial year, meaning the state is already more than halfway to the $4bn deficit forecast in the May budget for the full 2023-24 financial year.

The state’s quarterly financial report also shows net debt increased by $5.5bn in the September quarter, meaning that if Victoria continues to spend at the same rate for the rest of the financial year, net debt will hit $137.2bn by June 30 — $1.8bn worse than the $135.4bn predicted in the May budget.

In the year to September 30, net debt skyrocketed from $96.5bn to $120.6bn, representing a 25 per cent increase. But this is a fraction of the $171.4bn in net debt which Victoria is forecast to accrue by June 2027.