The state of Victoria is drowning in debt thanks to nine years of financial mismanagement by the Andrews Labor Government.
Victoria is sitting on a $116 billion debt pile, making it the nation’s most indebted state:
Victoria has the nation’s largest state debt (Source: Alex Joiner).
This ballooning in debt has been driven by the 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.
The Victorian Auditor-General has condemned this excessive spending (e.g., here and here), calling into doubt the efficacy of the state’s infrastructure spending program and the cost-benefit analysis that underpins it.
In August, Moody’s projected that Victoria’s debt would reach $226 billion by 2026, endangering the state’s credit rating, which is already the lowest in the country.
According to Moody’s, Victoria’s debt will have increased 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”.
One of the biggest risks to Victoria’s finances is former Premier Dan Andrews’ $200 billion 90 kilometre Suburban Rail Loop (SRL) project.
The SRL was a “captain’s call” by Dan Andrews.
The project was never submitted to Infrastructure Australia or Infrastructure Victoria for review. Nor was any business case conducted before the project was announced in the run-up to the 2018 State Election.
The SRL was not even disclosed to Victoria’s transport department for fear that it would be rejected.
According to the Parliamentary Budget Office, the net benefits of the SRL are expected to be just 60-70 cents for every dollar spent, or just 51 cents according to the Auditor-General.
Thus, the $200 billion SRL will drain vast sums of money from Victorians while squeezing out desperately needed infrastructure and services throughout the state.
Sadly, new Victorian Premier Jacinta Allan and Treasurer Tim Pallas have refused to cancel the SRL.
“Victorians voted for the Suburban Rail Loop. They voted for it twice”, Premier Allan said last week.
Treasurer Pallas said that politicians must have the resolve to follow through with major infrastructure projects that have received the approval of voters.
“I sometimes despair about public life in the sense that if governments have gone to an election on two occasions and sought a mandate to build a substantial piece of infrastructure, it won’t [be] delivered in my time in public life, it might not even be delivered in my time on this planet, but it is vitally important”, he said.
“Politicians, governments, need to provide the focus and resolve to deliver on the things they promised to their constituents”.
Transport experts, the Victorian Auditor General, and the Parliamentary Budget Office have all slammed the SRL for being a shocking waste of money.
Sadly, this brain fart of Dan Andrews will leave the state with a legacy of debt that will cripple generations of Victorians.
