Same Treasurer, different Prime Minister, even more debt. That is the story of today’s Victorian budget, relayed by state treasurer Tim Pallas.
It is the first state budget delivered since Dan Andrews retired as premier, making it new premier Jacinta Allan’s first since she took office, but that is pretty much all that has changed. Tax increases and broken election promises are scattered throughout this budget.
While points need to be awarded for effort when it comes to trying to clean up the fiscal mess he inherited, spending remains plentiful and debt continues to skyrocket.
Which isn’t exactly surprising given that this is Pallas’s tenth budget as Treasurer: he was never likely to make a 180-degree turn in his handiwork during the Andrews years.
That included racking up debt on a scale not seen anywhere else in the country in recent years, in response to the Covid pandemic.
The new Premier hopes to tax and spend her way out of trouble, but the fragile Victorian economy is unlikely to bear that burden. That said, businesses will appreciate some slight payroll tax relief announced in the budget.
Advance estimates of this budget reveal a debt burden much higher than what other states will bear in the coming years, which is one of the reasons why the Covid tax introduced in the last budget has been expanded in this one.
Victorian Treasurer Tim Pallas speaking in parliament alongside new Prime Minister Jacinta Allan (Tim Pallas and Jacinta Allan pictured)
Former Prime Minister Dan Andrews left a fiscal mess for his Labor colleagues to clean up (pictured Dan Andrews and Tim Pallas)
This will cause further pain for investors in Victoria, and is arguably the reason why businesses continue to leave Melbourne as property prices also decline.
Don’t be fooled by the illusion of a future surplus either. This depends on forecasts that may not hold up or survive the coming and going of electoral campaign promises.
Unemployment is forecast to rise and economic growth predictions are generous, to say the least. Meanwhile, state government tax revenue will rise from $39 billion this financial year to a whopping $45 billion three years from now. Property tax increases are among the increases.
The impact of the state debt burden won’t just be felt in Victoria, either. The current Covid levy will leave a gap in Federal Treasurer Jim Chalmers’ figures as he plans for Labour’s federal budget to be delivered next Tuesday.
This is due to the Commonwealth deductions allowed by the Victorian tax. There were apparently heated conversations between state and federal treasury officials in the days leading up to this budget.
There was never going to be an easy way out of the fiscal mess that Andrews left behind when he retired with his large lifetime parliamentary pension.
Cut and run might be the appropriate term to use, if polls hadn’t revealed that most Victorians wanted to see his back when Andrews resigned.
Yes, the ill-fated Commonwealth Games bid (and formal acceptance) has cost hundreds of millions of dollars, but it is the multi-billion dollar cost of pandemic relief and lockdowns that will take decades for the Victorian economy to recover.
The slowness of the process is compounded by the high interest rate environment, which makes paying off so much debt even more difficult. This financial year alone, the state debt interest bill will be $6.5 billion, almost $1,000 for every Victorian.
While there is an economic argument that Allan should have done more quickly to repair this budget – worsening the short-term pain for Victorians with fewer donations, but at least limiting how long the pain will persist – she has chosen a more path political.
Victorian Treasurer Tim Pallas delivers his 10th budget forecasting record state debt (Tim Pallas pictured)
New Victorian Prime Minister Jacinta Allan oversees her first budget, hoping it will give Labor a political boost (Jacinta Allan pictured)
There are cost-of-living measures, such as a $400 donation to parents in public schools. 700,000 Victorian students will be eligible and their parents will receive it before the start of the 2025 school year.
Allan does not want to end his political career as a one-term wonder, never backed by Victorians at the polls. A mere selection of factions after the Andrews years is not the legacy she wants.
Allan wants to emulate Anna Bligh after she replaced Peter Beattie in Queensland and won a subsequent election to consolidate her position.
But there are fair questions about whether more spending that prolongs the fiscal pain will help achieve that, even if voters welcome the new cost-of-living relief with open arms.
Is it possible that the Victorians would have rewarded her for breaking with the Andrews tradition of spending money the state doesn’t have?
Especially considering the terrible state of the Liberal Party in Victoria?
Maybe, but a tougher budget as a course of political action might have come too late if it had been implemented now.
Melbourne-based Red Bridge pollster Tony Barry says: ‘Our focus groups show that Jacinta Allan needs to ensure she is not simply presented as Dan Andrews’ stand-in. She must differentiate herself from him if she wants to win the next election. Until now voters have seen her simply as a blank canvas.’
Not since the 1980s had Victoria entered a death spiral of debt that forced the government to make difficult decisions.
The next state election will be held in 2026. While that is still more than two years away, it will take time, a long time, to “fix” the Victorian economy.
Repair work was probably due to begin in last year’s budget, but Andrews treated it as a swan song, rather than an acknowledgment of a fiscal failure that needed a proper reboot.