Australians on the hook for Victoria’s budget waste


The Australian’s Judith Sloan has backed former Australian Treasury official Stephen Anthony’s prediction that Victoria now may require a bailout from the federal government.

The Victorian Budget forecasts net debt of $188 billion by 2027-28, up from $115 billion in 2022-23:

Victorian budget projections

Source: Victorian Budget 2023-24

That means that each Victorian resident would owe $25,300 per head in state debt by 2027-28, up from $17,000 in 2022-23.


It is important to note that in 2018-19, just before the pandemic, Victoria’s net debt was only $23 billion, or $3,500 per resident. So we are talking about a massive increase in state debt.

Sloan notes that interest payments on this debt are slated to reach $9.4 billion a year by 2027-28. Meanwhile, government employee expenses are expected to blow out to at least $40 billion by 2027-28.

“To say Victoria’s fiscal position is now a disaster is to understate the point”, Sloan writes.


“The Labor government has been on a spending binge for close to a decade. Expect it to continue, but just at a slightly more subdued pace”.

“In Pallas’s first budget, employee expenses were a tad under $19 billion. In 2024-25, they are expected to be $36.5 billion. By 2027-28, they will reach $40 billion – at least. If Pallas were a CFO in the private sector, there is no way he would have lasted a decade”, Sloan says.

“The sad reality is that Victoria now has very little going for it, apart from rapid population growth spurred by excessive international migration. Its real per capita household income puts it in the bottom half of the states. High taxes are sending money out of the state, particularly in the real estate sector”.

“Victoria has a series of incomplete and wildly expensive infrastructure projects as well as the beginning of the insane Suburban Rail Loop”.


“[When] the alarm clock of disaster goes off, the federal government will have no choice but to bail Victoria out”, Sloan warns.

Victoria has the highest state debt and worst (AA) credit rating in the nation, and ratings agency S&P does not believe that this budget will improve the situation. There is the very prospect of another one.

The federal government has already bailed-out Victoria by handing it $3.8 billion in additional GST revenue, whereas New South Wales lost $188 million.

GST distribution

Thus, the federal government effectively robbed New South Wales and the other states to save Victoria.

The Victorian government has pig-headedly stuck with the $200 billion Suburban Rail Loop (SRL) boondoggle against the explicit advice of infrastructure experts.

These experts warned that the SRL is $200 billion down the drain, but the government has committed to building it anyway.


The Victorian budget revealed that the Allan Government is still expecting the Albanese Government to deliver “a matching contribution” to the SRL on top of its initial investment of $2.2 billion over three years:

SRL announcement

Source: Victorian Budget 2023-24

If this happens, it will be another form of bailout for a wasteful project that should never have gone ahead in the first place.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.