The State of Victoria has been living in a public service bubble.
Victoria’s net debt was $22.3 billion when the State Labor government delivered its inaugural state budget in 2015.
As of FY25, Victoria’s net debt has skyrocketed to $155.5 billion and is projected to rise to $194 billion by FY29.
Victoria’s dire budget situation is due in part to a massive increase in public service wages, which have consistently exceeded budget estimates.
In the 15 years leading up to 2022-23, the state’s public sector headcount increased by 59%, outpacing population growth of 29%.
Source: The Australian
Additionally, the state’s public servant wage bill increased by 152%, outpacing all other Australian states.
Source: The Australian
Victoria’s wage bill, which is the state government’s largest expense, totalled $19.5 billion in FY15. The most recent state budget projected that employee costs will hit $44 billion by FY29.
Use of external consultants and contractors by the state government has also ballooned.
Despite the boom in public servants and consultants, Victoria has the highest unemployment rate in the nation.
Now the public sector teat is being withdrawn, which risks driving up unemployment.
Victorian Treasurer Jaclyn Symes in February tasked Helen Silver with a review of the state’s public service.
The former secretary of the Premier’s department presented the results of her review to Symes in June, with Silver having been asked by Symes to look at the consolidation of government entities and cutting up to 3,000 public sector jobs.
Symes says she will release the results of Silver’s review in coming months, while a number of Victorian public service agencies and departments have already begun restructuring ahead of the release of the report.
Symes met with global ratings agencies S&P, Moody’s, and Fitch in New York last month, whereby she highlighted the Silver review to reassure analysts that the government was moving towards more fiscal prudence.
Between 2000 and 3000 public servants—or roughly 5% to 6% of the workforce—are slated to lose their jobs as part of a plan to restore the public service headcount to its pre-pandemic levels.
“Some areas have been quite explicit that it’s about [reducing] the head count to accommodate the reduced funding”, a public servant speaking on the condition of anonymity told The AFR.
“However, saying that it’s based on budget outcomes and not the Silver review is disingenuous because interim findings from the Silver review informed the budget”.
“The mood is incredibly stressed and tense … especially as we’re also waiting for the Silver review to drop. Potentially, staff have to go through another restructure after the Silver review is made public”, they said.
The Victorian government is under pressure to reduce spending after a decade of excessive expenditure on bureaucrats.
The result will be higher unemployment.
