Reality is biting the Victorian budget. To be precise, it is taking a $50 billion chomp out of the money this government has, and the one that follows will have to pay for the services and infrastructure people need.
This huge figure is the cumulative interest the state must pay back this financial year and over the next four years on the money borrowed by the Andrews and Allan governments.
This year’s bill is $7.85 billion. By 2029-30, it is forecast to be $11.8 billion. There are plenty of numbers in the state budget handed down on Tuesday but, for now, let’s stick with these.
The cost of repaying debt, over the forward years of the budget, increases by 50 per cent.
It is the fastest growing line item of expenditure in the budget, with daylight second. It is growing at two and half times the rate of debt. More on this later.
Treasurer Jaclyn Symes describes her second budget as a document of careful choices and difficult decisions and in some respects it is. In its 12th and perhaps, final year, the government has lowered its eyes from the distant horizons of mega projects to smaller, more pressing household concerns.
“This budget is about getting to the heart of that feeling,” Symes said. “It is about helping with the cost of living. It is about giving families more time in their day”.
It is a budget which projects warmth and care.
But the cold, hard cost of servicing debt, a cost driven by global inflation, rising interest rates and the government’s refusal to pay down some of what it owes, will make already difficult decisions more difficult in the future.
$11.8 billion is more than the cost of the West Gate Tunnel. It is the amount of taxpayer money the government says it will spend on the first stage of the Suburban Rail Loop. It is more than next year’s annual appropriations for any government services beyond health and education.
By 2029-30, 10 cents of every dollar of revenue raised by the government will go towards repaying interest on the debt. And this figure will keep on rising, perhaps sharply, as the yield rate on government bonds – the state’s interest rate – returns from the free money period of the pandemic years to normal levels.
Some of the reasons for this, as Symes repeatedly pointed out, are beyond the control of the Victorian government and any government in Australia. Her budget speech was replete with references to Donald Trump’s war in the Middle East and the global oil crunch which has led to a spike in inflation and in response, interest rates.
But amid Symes’ difficult choices – and those imposed on her by Premier Jacinta Allan, senior ministers and backbench MPs all pushing for election-year measures to sweeten Labor’s offer to voters – there are other ones the Treasurer could have made.
In the year since Symes handed down her first budget, the government found an additional $5.3 billion in revenue for this financial year. Some of it came from a higher-than-expected tax take. Some of it came from larger-than-expected federal government grants.
All of it is being spent. None of it is being used to retire debt – an old-fashioned concept altogether missing from the budget papers.
RMIT economist David Hayward says this is a continuation of a well established trend under this Labor government.
“Whenever they get additional cash they spend it,” he says. “They have spent all the chocolates.”
The government calculates that voters will be more grateful for the things and services it is spending money on than the rising cost of servicing debt. More than likely, they are right.
But in choosing to keep ignoring the fast rising cost associated with Victoria’s debt, the government is gambling with more than the outcome of the November election.
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Chip Le Grand leads our state politics reporting team. He previously served as the paper’s chief reporter and is a journalist of 30 years’ experience.Connect via email.
