Before the 2014 election, fiscal surgeon Bob Officer signed off on Labor’s election costings. Today he’s less optimistic about the state’s balance sheet.
Just before the 2014 election, then opposition leader Daniel Andrews was desperate to neutralise what was seen as a key vulnerability for Labor.
Getting Officer, a man highly respected on the conservative side, to sign off on Labor’s financial plan was a clever move. Nine years later, Officer now says the financial situation confronting the state is “somewhat intimidating”. He points out that Victoria’s debt levels are now much greater than during the Cain-Kirner years both in absolute and relative terms.
According to state Treasury’s May budget predictions, net debt is set to grow from about $135.4 billion by the middle of next year to $171.4 billion by mid-2027. The idea is that a return to budget surpluses from 2025-26 onwards will gradually begin to drag Victoria’s debt levels back down.This, however, remains an aspiration extending beyond the budget’s four-year forecasting period. There is a lot that could go wrong between now and then.
Back in 1992-93, the financial year Kennett became premier, Victoria’s interest bill was soaking up the equivalent of almost 14 per cent of total revenue, compared to about 5 per cent currently .Other economists, including RMIT emeritus professor David Hayward, have argued we should not yet be alarmed about the level of debt. Hayward too has pointed out much of the borrowing was locked in at historically low interest rates, using long-term government bonds.
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