Bloated and out of control, Victoria’s spending puts thousands of jobs on the line

On a Friday afternoon before a long weekend, the Victorian government quietly administered the last rites to the Tim Pallas era with the release of a mid-year financial report book-ending his 10 years as state treasurer.

It didn’t get much attention, and the Allan government didn’t seek any. It marked the occasion earlier this month with a short press release highlighting figures showing that the state economy, while hardly going gangbusters, is at least showing signs of life.

Premier Jacinta Allan and Treasurer Jaclyn Symes (left) have announced an independent review into the Victorian Public Service.Credit: Justin McManus

The same can no longer be said of Pallas’ tenure of the state’s finances. If the report can be distilled into a fiscal epitaph, it would read:

Pallas, Tim, 21.7-146.77.

This is the lifespan of treasurer Pallas, measured in the billions of dollars of debt he inherited from the previous administration in December 2014, and the many billions more he’d bequeathed to future generations of taxpayers by the time he had cleared out his desk in December 2024.

A comparison of the first budget update Pallas delivered in the job and this month’s mid-year financial report showing Victoria’s fiscal position on the day of his retirement is instructive in other ways. Although the most striking figure is net debt, the bigger story is what has happened to the size of the Victorian government.

At the time Pallas handed down the 2014-15 budget update, a document brimming with the well-intentioned commitments to maintain a budget surplus, a triple-A credit rating and keep net debt low, the state government’s annual operating expenses were running at $52 billion.

When Pallas left, the government’s operating expenses had nearly doubled to $101.65 billion.

This is not the cost of orbital rail tunnels or massive road projects or removing level crossings or the way the state haemorrhaged money during the pandemic. It is what has happened to the bog-standard, day-to-day cost of running the state.

The best news Victoria has received in a while is that Premier Jacinta Allan and her new treasurer, Jaclyn Symes, understand it has gotten out of hand.

Victorian Treasurer Tim Pallas when preparing to deliver his first budget in May 2015. Credit: Penny Stephens

Before we get to what they are doing about it, let’s break down the Pallas era a little further.

During his time in charge of Treasury, Victoria’s population grew from nearly 6 million to almost 7 million people, an increase of 17 per cent. Over the same period, the cumulative impact of inflation meant that $1 of government expenditure in 2014-2015 was equal to $1.28 spent in 2023-24, according to the Reserve Bank of Australia.

If we adjust total operating expenses at the start of the Pallas era for inflation, $52 billion equates to $66.6 billion. Compare that to today’s figure of $101.65 billion and you are looking at a jump of more than 50 per cent.

That is three times the rate of Victoria’s population growth.

We are all paying for it. The state’s total tax take, even when adjusted for inflation, is 70 per cent higher today than when Pallas took control of the purse strings.

Now for the government’s remedy.

When Allan and Symes last month announced they had appointed former Department of Premier and Cabinet secretary Helen Silver to review the Victorian Public Service, attention immediately focused on how many jobs would be lost.

Symes estimates that a public service which employs nearly 55,000 people on a full-time basis will shed up to 3000 positions.

Silver’s brief is bigger than this. It’s a serious, overdue attempt to deflate a bloated government.

The Victorian government publishes a non-exhaustive list of departments and agencies. It runs to 322 entities. This absurd number illustrates the extent to which government has spread, often with overlapping authorities and agencies, into every inch of public life.

For example, if there is a reader who can tell me what Development Victoria does differently to each of Developer Victoria, Economic Growth Victoria, Engage Victoria, Launch Victoria and Breakthrough Victoria, they can have a free subscription to this column for six months. (Second prize is a year’s subscription).

As The Age has previously reported, Breakthrough Victoria has a big target on its back and will be closely scrutinised by Silver and her team of reviewers. In the meantime, here are some other questions before Silver:

Do we need a dozen separate TAFE boards? If Ro Allen is doing their job as Victoria’s Equal Opportunity and Human Rights Commissioner, why do we also need a Disability Services Commissioner, a Disability Worker Commissioner, a Commissioner for LGBTIQA+ Communities, a Public Sector Gender Equality Commissioner, a dozen Multicultural Commissioners, a Commissioner for Children and Young People and a Commissioner for Senior Victorians?

Does VicHealth, an organisation established in 1987 to help arts and sports organisations addicted to tobacco advertising kick the habit, still have sufficient purpose as a standalone, health promotions agency?

These questions should not be confused with the kind of reckless, ideological campaign Donald Trump and Elon Musk are pursuing in America.

You won’t find Allan or Symes wearing MAGA hats any time soon.

But they have asked Silver to find out which government programs work and which don’t, which agencies are needed and which are redundant, and what jobs should go.

The answers can’t come soon enough.

Chip Le Grand is state political editor.

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