By guest contributor Ken Atchison, founder of Atchison Consultants
A recent report by Victorian Ombudsman Deborah Glass OBE has brought into focus the appalling governance record of the Andrews Government. She has stated that politicisation, actual and perceived, is a problem undermining public administration in Victoria. Her report details the reasons behind this conclusion.
Moody’s currently rate Victorian Government debt as Aa2 with a negative outlook. The key criteria they use for assessing credit ratings of governments include financial position, debt levels and governance.
With debt now projected at $256 billion in 2027 and no policies in place for management, a further downgrade in the credit rating of Victorian Government debt is now inevitable.
Despite ill-informed statements by government leaders, credit ratings matter. Interest rates on Victorian Government debt will increase. A lower credit rating will attract an interest rate premium of around 0.5% over AAA-rated bonds, increasing interest payments by $1.26 billion per annum or $100 million per month.
This will mean even higher debt and greater debt servicing challenges.
Recent ALP premiers and treasurers of Victoria have shown an incredible capacity for mishandling the finances of the state. An inability to produce valid financial analysis, together with extraordinary cost overruns on projects and an inability to deliver projects on time indicates a failure of public financial policy.
As a result, Victorian residents are suffering the consequences of higher taxes and higher charges with higher imposts still being determined. Business failures are at record levels in the state, indicating many are not able to deal with the additional burden. Investors are fleeing the state because of large increases in taxes and government charges. Private sector employment will fall.
The only solution will be further cuts in public services being schools, health care, police and emergency services. One day the massive infrastructure extravagance will be curtailed. Transport experts, the Victorian Auditor General, the Parliamentary Budget Office have all slammed the $200 billion+ Suburban Rail Loop for being a shocking waste of money.
In due course when the financial position deteriorates public servants will lose jobs. Public services such as health, education and emergency services are being slashed.
WorkSafe, the state workplace health and safety regulator and insurer, is already insolvent based on private sector regulations. It will likely be privatised.
Victoria’s problems will become a burden for Australia. All Australians are suffering from the consequences of financial incompetence of the Victorian Government as persistently higher Victorian inflation rates feed through to national rates. When the inevitable restrictions in Victoria arise, larger outlays to cover unemployment benefits paid to Victorians will add a strain on the Federal budget. The Victorian state is constantly pleading for more Federal government funds.