Melbourne has been the fastest expanding city this century, adding 1.6 million residents (45% growth) since 2000.
This extreme population growth has required massive infrastructure investment, which is now drowning the state in debt:
Victoria’s net debt is expected to top $165.9 billion by 2026, and the interest bill is already $10 million a day.
That’s despite the state government selling-off a raft of state assets.
Victoria also has the nation’s lowest credit rating.
Victorian Premier Daniel Andrews is trying to blame his government’s budget woes on the need to spend money during the COVID-19 pandemic.
However, analysis of Victorian budgets, budget updates and financial statements has disclosed that in excess of 40% of the debt accrued by his government since 2019-20 is not related to COVID.
In addition, just over one fifth of the $165.9 billion of net debt the state is forecast to reach by 2025-26 can be connected to spending on COVID:
Independent economist Saul Eslake recently blamed the Victorian Government’s debt blowout on its own profligate infrastructure spending.
“Victoria’s financial position is by most measures in worse shape than any of the other jurisdictions, except the Northern Territory”, Eslake told The AFR.
It largely “reflects conscious policy decisions ever since they came to office, to embark on very big, largely debt-funded infrastructure spending programs”.
“All of those projects have suffered from cost overruns, as big projects almost inevitably do”, Eslake said.
Indeed, much of the infrastructure spending driving the state’s debt has been poorly targeted and dubious value for money, as criticised by the Auditor-General of Victoria (e.g. here and here).
The $200 billion Suburban Rail Loop is one of the most wasteful infrastructure projects I’ve ever seen, with the potential to bankrupt the state.
That said, Victoria is also a victim of the federal government’s mass immigration program and the vertical fiscal imbalances of the political system.
Because the Commonwealth takes more than 80% of overall tax revenue in Australia, the states are always at risk of running out of funds for social services and infrastructure.
Thus, the extreme immigration driven population growth foisted on Victoria (Melbourne) by the federal government has left the state budget badly starved of funds which, combined with incompetence, has sent Victoria’s debt soaring.
The situation will only worsen for Victorians.
The population projections in the latest federal budget showed that Victoria will again lead the nation’s population increase, growing by an insane 694,000 over the five years to 2026-27:
That’s 1.5 Canberra’s worth of additional population to land in Victoria in only five years, which will obviously need infrastructure and social services.
In turn, Victoria will waste countless more billions on wasteful projects that wouldn’t be required without the extreme immigration-driven population growth.
I’m sure the Albanese Government would be far less enthusiastic about immigration if it had to split the financial costs with the states.
