Victoria’s debt set to soar to $190 billion, equivalent to a quarter of the state’s economic output.
Treasurer Tim Pallas believes that the budget is aimed at supporting families and tackling inflation.
Opposition Leader John Pesutto has criticized the current Labor government’s financial decisions, citing what he calls the state’s mismanagement as debt continues to rise.
During Treasurer Tim Pallas’ delivery of the 2024 to 2025 Victorian budget on May 7, it was revealed that the projected debt would reach $187.8 billion by the 2028 financial year, following a challenging period of recovery from one of the world’s longest lockdowns due to COVID-19 under former Premier Daniel Andrews’ leadership.
State Debt Growth Trajectory
The budget document projects a steady increase in debt over the following years, from $156.2 billion in the 2025 financial year to $179.2 billion in the 2027 financial year.
It also estimates that net debt will account for 24.5 percent of gross state product (GSP) by 2025, rising to 25.2 percent by 2026-2027 and then dropping to 25.1 percent by 2027-2028.
The budget anticipates an average interest expense of 7.8 percent per year over the budget period and beyond.
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The government aims to stabilize net debt as a percentage of GSP through increased operating cash flow surpluses, which will fund more capital expenditure and reduce reliance on borrowing, according to the budget.
Operating surpluses of $1.5 billion in 2025 to 2026 and $1.6 billion in 2026 to 2027 are also projected in the budget.
Opposition Criticizes Labor’s Financial Management
Opposition Leader John Pesutto criticized the budget as a result of what he perceives as a decade of financial mismanagement under Labor’s administration.
He pointed out record debt, interest, taxes, service cuts, and poor outcomes, stating that Labor’s inability to manage finances is impacting Victorians negatively.
In contrast, Treasurer Tim Pallas emphasized that the budget is centered around fiscal discipline and making informed decisions to tackle challenges like inflation and workforce shortages.
He acknowledged the impact of inflation on the economy and families, citing a 22 percent increase in construction costs since 2021 due to rising prices of materials, labor, and transportation.
The treasurer also noted workforce pressures caused by low unemployment levels and emphasized the need for clear-headed decisions to navigate challenging economic times.
Responsible Financial Management According to Budget Papers
The government’s long-term financial strategy focuses on responsibly managing Victoria’s finances to support services, infrastructure, households, and businesses.
Efforts are aimed at enhancing public services and steadily improving public infrastructure over time, as outlined in budget paper two.
The budget details the government’s commitment to investing public sector resources in services and infrastructure to maximize economic, social, and environmental benefits.
Despite the impact of the COVID-19 pandemic on the state’s financial position, the government remains committed to managing finances responsibly and improving public services and infrastructure.
Opposition Shadows Government’s Fiscal Practices
Shadow Treasurer Brad Rowsell criticized the government for increased taxation, higher spending, and fewer delivered results, describing the budget as a continuation of past mismanagement.
He highlighted the delayed Melbourne Airport Rail Link project and criticized the lack of progress in repairing past financial damage.
Support for Children in Public Schools
The Victorian government’s budget includes a $400 payment to support 700,000 students in public schools.
This payment, due in term four of 2024, extends to families of children in public schools and concession cardholders at non-government schools, aiding with school-related expenses like uniforms, camps, excursions, and sporting activities.
Each family with three children stands to receive a $1,200 payment to offset school costs, with the support provided in the form of credits or vouchers to facilitate purchases of school uniforms and other necessities.
During discussions on the $400 payment, Premier Jacinta Allan emphasized the government’s commitment to supporting Victorian families and easing the financial burden on households by providing flexibility in using the School Saving Bonus on essential school amenities.
