Pallas had a front-row seat, but he wasn’t driving the bus

When a chipper Tim Pallas emerged a few days ago from behind the glass siding doors of No.1 Treasury Place armed with a printout of figures and talking points to spruik the government’s budget update, he already knew his time as treasurer was at an end.

In his own telling, the decision to quit crystallised about two weeks ago, when he quietly marked 10 years in the job.

For Victorian premiers, it is a duration of service memorialised in bronze. For treasurers, it reinforces the sense that your career is on repeat and today’s and tomorrow’s problems are just variants of the same ones you dealt with years ago.

Tim Pallas, with Premier Jacinta Allan, after announcing his resignation as treasurer and an MP on Monday.Credit: AAP

The relationship between Pallas and Premier Jacinta Allan – while still functional and, on the surface, collegiate – had also become increasingly fractious since August, when the treasurer abandoned his plan to find savings across the health system.

The treasurer had pushed for structural changes and operating efficiencies to make the state’s public hospitals meet their budgets. Allan supported this at first, but then baulked at the mounting political cost. To get out of a jam, she promised the hospitals $1.5 billion in additional funding that Pallas didn’t have in his coffers.

Last Friday afternoon in the Treasury Place courtyard, while Pallas was updating the budget, he was also delivering a valedictory speech. We just didn’t know it at the time.

It began on a surreal note when the man who should have the best understanding of Victoria’s dire circumstances declared the state was entering a new era of economic security.

“The job is not done,” he said. “I don’t want to mislead you to say that the government has effectively declared its fiscal strategy is at an end and concluded. What it does tell us is that the strategy is working and working very dramatically.”

A former Labor minister, who worked closely for many years with Pallas, says this claim belies the scale of the financial crisis that Victoria faces, if not now, then when the full cost of servicing the mountain of debt they took on before, during and after the pandemic becomes clear.

“It is a big, big wave. They never saw it coming, and it has dumped on them,” they said, speaking anonymously to discuss internal matters. “I don’t think they know how to get out of it, to be honest.”

Pallas’ personal responsibility for this requires balanced judgment.

As Daniel Andrews’ treasurer, Pallas should have been the fiscal brake against the big-spending instincts of a premier who – particularly after the electoral success of his first-term program to remove level crossings in Melbourne’s suburbs – was prepared to dramatically increase public debt to fund what he saw as essential and popular transport infrastructure.

He was also a member of a government that Andrews ran with singular purpose. No one who sat around the cabinet table in those years has any recollection of Pallas pushing back against the state’s mushrooming Big Build projects, but even if he had, Andrews was by that stage a runaway train.

“He would have been a very different treasurer with a different premier,” one of Pallas’ fellow cabinet ministers said. “It was very much Daniel who was driving what was happening.”

Another former Labor minister added: “You saw the authority of the premier, his personal office, the number of advisers, the presidential style leadership. It made it very difficult to curtail the big-spending, big-vision instincts of a premier who wanted to change things.”

In the year since Andrews quit as premier, little has changed.

The Allan government this year entered into contracts to build the first stage of the Suburban Rail Loop, a long-term project that currently carries the eye-watering construction cost of $1 billion a kilometre. When asked on Monday whether he had ever pushed back against Allan’s pet project, Pallas was emphatic: “Never.”

Then-premier Daniel Andrews and Tim Pallas in 2018.Credit: Eddie Jim

Victoria’s net debt is forecast to reach $187.3 billion, but Pallas’ updated budget papers do not extend far enough into the future to know when our debt peak will be reached.

Pallas claims debt has stabilised, but it is still forecast to grow by $13.1 billion, $10.5 billion and $8.3 billion a year in the budget out years.

The pay-off to Victorian voters will start being realised from next year, when the Metro Tunnel and West Gate Tunnel projects both open to consumers. Former premier Steve Bracks says these projects, once completed, will be an important part of Pallas’ legacy.

Bracks recalled that Pallas quit a well-paying job as ACTU assistant secretary to become his chief of staff before the 1999 election. It was a brave career move given few people other than Bracks gave Labor any chance of winning the election against a barnstorming Kennett government. “That shows that he is prepared to take a risk, he is game,” Bracks said.

Throughout his government, Bracks relied on Pallas as his principal political adviser and negotiator-in-chief. It was Pallas who helped him secure the support of three rural independents to enable Labor to form minority government in 1999. It was Pallas who, whenever industrial disputes flared, was brought in to navigate a way through.

Bracks also pushed hard for Pallas to enter parliament in 2006. He was at breakfast on Monday when Pallas called to say he was joining him in political retirement. He said his friend’s strategy of using the state’s balance sheet to borrow to build infrastructure that would be needed by future generations was a sound one – before circumstances beyond his control intervened.

“You couldn’t have anticipated the two years of the pandemic, the impact COVID had in Victoria and the need to borrow in order to keep the economy afloat and businesses going,” Bracks said.

“I think the borrowing for capital works would have been fine, but having to encounter an unexpected issue like that has been really difficult. I think he can look back, as he sees these great projects opening, and think that was me.”

Pallas’ initial plan, according to a well-informed source speaking anonymously to discuss internal matters, was to step down as treasurer, move to another portfolio and remain in his seat of Werribee until next year’s election. This idea was ultimately rejected by Allan and her advisers.

Pallas will probably thank them in time for giving him the chance of a clean break.

At the age of 64 and after 25 years at the centre of Labor’s political machine, he has had a front-row seat to one of the most consequential governments in Victorian history. Someone else can be there for the crash.

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