Spend now, pay later: State budget has shiny offerings for voters, but the cupboard is bare

There is a certain political inertia that surrounds budgets in an election year: whatever may be said about the benefits of fiscal prudence, governments seeking re-election are always eyeing shinier offerings to put before voters.

Over the past month, we have seen handouts from the Allan government aimed at cost-of-living pressures, from $750 million for a 20 per cent refund on car registrations to $432 million to extend free public transport until the end of May and introduce half-price fares for the rest of 2026.

Another $100 million has been put towards upgrading bus routes across Melbourne and regional Victoria, $673 million towards 25 new X’Trapolis 2.0 trains and $77.5 million has been earmarked for extra services. More than $760 million has been pledged for new or expanded schools, with another $294 million for upgrades of existing facilities. An extra $1.6 billion for health services and hospitals has also been unveiled by Treasurer Jaclyn Symes.

This is small change though compared with our massive investment in capital works and the state’s associated net debt. The latter figure, massaged over with forward estimates, will sit a whisker below $200 billion by the decade’s end.

The accounting tricks deployed on that still mind-boggling figure pale in comparison with the way in which the government has secured its $1 billion surplus for 2026-27 by extending the state’s lottery licence by 40 years, a move that seemingly involved no competition and no transparency in process.

Symes and Premier Jacinta Allan clearly hope that if money is delivered in ways that “families can feel straight away” – a refrain of the budget speech – larger problems, especially the state’s nation-leading debt pile, can be sheeted home to “wars and shocks and impacts from overseas”, rather than years of Labor mismanagement.

Last year – before war in the Middle East and shipping gridlock in the Strait of Hormuz – Symes spent a $3.7 billion GST windfall without paying down state debt, the cost of which is steadily mounting. Economist Saul Eslake called it “a big middle finger to anyone who has concerns about where Victoria is financially”. The finger was hoisted a little higher this year as a surprise $5 billion kick was promptly spent in its entirety.

Despite declaring on Tuesday that “we have made responsible economic choices … building the strength Victoria needs to weather uncertain times”, Symes is confronted with a bill for interest on the debt of $7.85 billion, growing to an estimated $11.8 billion in 2029-30.

As state political reporter Chip Le Grand writes: “It is the fastest-growing line item of expenditure in the entire budget, with daylight second. It is growing at 2½ times the rate of net debt.”

Rating agency Standard & Poor’s expects that by next year Victoria will have debt equivalent to double its entire revenue, that ratio having tripled since 2019 and now the highest of any state.

Rather than slowing this juggernaut by paying some of the debt down, the government counts on expanding the economy to outpace it. Unfortunately, growth is now forecast at 1.5 per cent in 2026-27, well below the 2.75 per cent figure in last year’s budget, and remaining 0.25 points lower than previously expected over forward estimates.

This is not about pandemic stimulus and a hangover; the government borrowed big and hoped for the best from the world around it. This seat-of-the-pants financial plan has predictably come unstuck in these unpredictable times.

The risk from fate’s sideswipes could have been the lesson from COVID-19’s black swan. Instead the state somehow expected the era of free money would roll on forever. The lack of rigour flowed then through to the projects bankrolled by this debt from their selection to their delivery.

This cabinet, having spent borrowed money which in many cases, according to the report by anti-corruption expert Geoffrey Watson, SC, ended up in the pockets of criminals, should be ashamed of its complete abrogation of the responsibility to come up with something approaching a plan to repay it.

This is the election challenge for Opposition Leader Jess Wilson, not least when the government responds with a scare campaign about cuts.

There is a real question whether either side of politics is prepared to wear political pain in the short term to put Victoria’s finances on a sounder footing.

This budget contains measures that the government claims “families can feel straight away”, from funding for paediatric surgeries and colonoscopies to continued relief for first home buyers and $2.5 billion for the Thriving Kids program.

One wonders how the mums and dads in all those families will feel about what their children are left with in the years to come.

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