Victoria is the nation’s most indebted state thanks to nearly a decade of wasteful spending:
Victoria has the nation’s largest state debt (Source: Alex Joiner).
Victoria’s $116 billion debt pile has been driven by the state government’s decision to “embark on very big, largely debt-funded infrastructure spending programs”, according to independent economist Saul Eslake.
“All of those projects have suffered from cost overruns, as big projects almost inevitably do”, Eslake said in May.
This wasteful spending has earned condemnation from the Victorian Auditor-General (e.g. here and here), which has questioned the efficacy of the state’s infrastructure spending program and the cost-benefit analysis underpinning them.
Last week, Moody’s ratings tipped that Victoria’s debt would balloon to $226 billion by 2026, in turn threatening the state’s credit rating, which is already the lowest in the nation.
This projection from Moody’s would mean Victoria’s debt will have ballooned by 85% in only five years, from $122 billion in 2022.
“Despite the underlying strength of the Victorian and broader Australian economy, the state’s debt burden is unlikely to stabilise before the end of the fiscal year ending in June 2028”, Moody’s warned.
“This rapid (and prolonged) growth in debt amid higher interest rates will raise borrowing costs and weaken debt affordability over time, limiting headroom under current rating tolerances”.
The Andrews Victorian Government has announced cuts to infrastructure projects, public servant jobs and cancelled the Commonwealth Games to strengthen the state’s finances.
However, there are fears that Dan Andrews’ $200 billion Suburban Rail Loop (SRL) boondoggle could financially cripple the state.
The net benefits of the SRL were estimated to be only 60-70 cents for every dollar spent, according to the Parliamentary Budget Office, or 51 cents, according to the Auditor-General.
Several economists and infrastructure experts came out last week slamming the SRL and calling for it to be abolished.
RMIT planning professor Michael Buxton told 9 News that “the figures being proposed for the [SRL] project by the government have never stacked up. A series of assumptions that are just completely unfounded”.
“There’s no guarantee the Commonwealth will chip in, so the government is clearly massively short of funds”.
Whereas the Grattan Institute’s Marion Terrill said “isn’t it time to cancel Suburban Rail Loop? It is surely better, if you find yourself in a hole, to stop digging”.
The $200 billion SRL will drain massive sums of money from Victorians while crowding out urgently needed infrastructure and services across the state.
It is a giant financial black hole that will divert funds from more critical initiatives and social programs while plunging Victorians deeper into debt.
Please Dan Andrews, put an end to this nonsense. Don’t condemn Victorians to decades of debt slavery and cancel the SRL before it’s too late.
