The release of the latest Victorian budget indicates another surplus, this time for $2.9 billion over the 2016/2017 year. It has now also released its expected funding requirements over the forward estimates period (see below table). The Victorian Government, as with its NSW counterpart, is currently in the enviable position of being able to repay debt, and it officially plans to reduce government and state enterprise (“Participating Authorities”) debt by $1.5 billion over 2016/2017.
Whenever governments run surpluses for sustained periods, bond markets can reach the point where future availability can become an issue, such as in the early 2000s with regards to Commonwealth bonds. Despite having run surpluses for the last two decades and the Victorian budget forecasting surpluses for the next four years, TCV’s statement indicates a total of $14 billion will still be required from 2017/18 through to 2019/20.
Maturing bonds account for $8.5 billion, while the funding requirement of the government sector and state-owned enterprises account for the rest. The discrepancy between the total of the surpluses and the funding requirement comes down to definitions used in the budget papers; budget items are typically “operational” and do not include all cash flows in and out of government coffers.