By guest contributor Ken Atchison, founder of Atchison Consultants
It is almost unbelievable that a government could place the state of Victoria in such a parlous financial position. There are some basic services which the Victorian residents expect from the state government, such as education, health, transport, judiciary, police and fire services. Delivery of these services is being reduced due to financial strain while funds are wasted through incompetence and undisciplined spending.
Extravagant spending has been applied by the Victorian Government whenever any issue reflecting badly on popularity has emerged. Focus groups determine policy, not any analysis. Accountability is absent from the Victorian Government regarding actions it has taken.
Spending other people’s money is the mindset. The Victorian Government believes the rest of the Australia should pay for their incompetence. Victorian Treasurer Pallas has stated “It is wrong that we constantly are the milking cow of the Federation. We are constantly subsidising poor performing states.” In the quasi-command economy model adopted by Premiers Andrews and Allan, their political power must not be challenged.
All this spending in Victoria requires additional funding and it is mostly through increased debt, constantly adding to the debt burden on future generations. Luckily, at least for Victorians, the Federal Government responded and delivered a $3.25 billion subsidy for the North-East Link project. This project, initially costed at $10 billion, is now projected to soak up $26 billion.
However, another significant infrastructure project which was being jointly funded by the Victorian and Federal Governments will not proceed. An airport rail link which would change Melbourne from a low-grade destination has effectively been cancelled but a rail link between two suburbs which will have minimal passengers somehow is a priority. As Michael Buxton, an RMIT Professor, has stated, “A fantasy. A back of the envelope idea of (former) Premier Andrews”.
Scrutiny of spending through cabinet and parliamentary sittings has been avoided while business cases are poorly prepared or nowhere to be seen. The previous Victorian Premier stated accountability measures such as parliamentary scrutiny are not important.
Victorian government debt has grown at an extraordinary rate, particularly after the Labor Party was re-elected in 2018. This is shown in the chart below taken from the 2024/2025 Budget Papers. Debt will grow to $67,000 per Victorian household over the forecast period. Each Victorian household will bear this burden in some way and that’s on top of any home loan, car loan and credit card payments.
There is no policy for servicing the increasing Victorian debt. This is particularly concerning as interest rates rise. A government which is borrowing to pay interest, demonstrates fundamentally flawed financial management.
Ratings agencies consider economic strength, governance strength and fiscal strength and Victoria is challenged on all these factors. Any economic growth has come from international migration and Gross State Product per capita is not growing. Governance has been savagely criticised by the Ombudsmen. Growing debt demonstrates poor fiscal status.
These agencies will almost certainly downgrade Victoria’s credit rating. This will add to the interest rate payable on the debt reflecting the decline in credit rating. Moody’s conclude that Victoria, uniquely in Australia, has a negative outlook which means future living standards are at risk.
As Salta Properties’ Sam Tarascio stated, “Capital is flowing out of the state due to the ongoing and constant tax burden on property”.
Resources for school upgrades are not available. Deterioration of the health services is continuing with waiting times for surgery increasing constantly. Public transport for growing fringe suburbs is not being provided. Backlogs through the judicial system are growing. Crime, especially among youth, is growing. Equipment for fire services is out of date and inadequate.
However, there are some beneficiaries. Employment as in the Victorian public sector bureaucracy has increased by 59% over 15 years with the wages bill 152% higher.
Irresponsible financial management by the Victorian Government through excessive debt does matter. . Opposition party analysis shows that the government has 43 new or increased taxes; land tax has increased over 200%! A continuing decline in living standards of Victorians will result and departures of residents from Victoria will increase. A Federal Government bailout of Victoria will not occur until the consequences of financial incompetence impacts the Federal fiscal position.