The latest figures released by the government show where its spending is going, and where the money to pay for it all is coming from.
The Allan government yesterday delivered its final budget before the state election, with forward estimates now showing where it expects the state to be by the end of the decade.
Treasurer Jaclyn Symes characterised this year's budget as "disciplined", spruiking a billion-dollar surplus as a sign of government restraint. The surplus builds on a smaller one generated last year, following years of operating deficits stretching back to the beginning of the COVID-19 pandemic. But experts say the balance sheet tells a different story, one where the government has continued to spend despite an influx of unexpected cash.
Instead, the government opened its coffers, providing an additional $4.4 billion in funding, with more earmarked in the coming years. David Hayward, a public policy professor at RMIT University, said the Victorian government had taken full advantage of the friendlier relations between state and federal governments.
"The Albanese government has been much more generous to Victoria than the Morrison government was when they were in office, and they've just spent it," he said. Vic budget winners and losers Despite rising debt, the Victorian government's found money for hip-pocket measures and a justice system overhaul. These are some of the winners and losers.
Despite its delivery of a budget surplus, spending has kept pace with the money coming in, with a state election looming at the end of the year. It will also start funding its $2.2 billion disability inclusion program, with a quarter-billion dollars committed this year to meet demand for individualised disability support in government schools.
Health will also remain Victoria's biggest expenditure, with nearly $400 million invested in patient care in line with the newBut amidst a flurry of spending and promises of surpluses in coming years, the government has been more tight-lipped about the debt underpinning it all.
"It's an election year, and I think that they've worked out that there's more to be had by spending, than retiring debt," he said. Ms Symes said on Tuesday that the government's goal was to first "stabilise" the debt before reducing it. The government expects the state's total borrowings to grow about 20 per cent from $203 billion to $243.4 billion by 2030.
That increase will send the interest payments on Victoria’s debt from $8.9 billion this year to $11.8 billion year by 2030, or $32.4 million a day It means even without funding any additional spending, the government will need to find another $2.9 billion in annual revenue by 2030 to keep services running and keep its promised projects on track. EY Senior Economist Paula Gadsby said the increased debt would continue to pile the pressure onto Victoria.
"Although operating surpluses are forecast from this financial year, debt metrics continue to deteriorate," Ms Gadsby said. "These debt metrics continue to deteriorate and place pressure on Victoria's AA credit rating and suggest a reduced capacity to service debt from its existing revenue base. " But the government is confident its revenue will continue to grow in coming years to meet that debt burden.
It forecasts continued growth for its three major taxation avenues: payroll taxes, stamp duty and land taxes. Payroll taxes — which apply to businesses with a national wage bill over $1 million — is projected to grow by 4.9 per cent a year. Land tax revenue growth is similarly expected to grow by 5 per cent a year, while the government forecasts stamp duty revenue will grow 7.4 per cent a year.
The projections come even as the government forecasts a drop of nearly $600 million in stamp duty revenue this year due to high interest rates and a cooler property market. All of the government's forecasts have been developed on the basis that inflation will dip back to target levels in coming years, taking the cash rate along with it.
The forecasts for 2025/26 until the end of the decade also assume population growth, unemployment and wage growth remain steady while the state's economy grows faster. With war in the Middle East still creating economic uncertainty, Professor Hayward said his choice would have been to attack the debt sooner rather than later.
"I would have been increasing the surplus so that we reduced the debt faster than we planned," he said. "Just because I'm a little bit worried about what might happen tomorrow. The world is a very uncertain place at the moment, and I think the more we have tucked away for a rainy day, the better. "Interest Rates
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