Victorian sinkhole economy may require federal bailout

The Victorian Budget, released on Tuesday, shows that net debt is projected to peak at about $199 billion within four years, just under the politically sensitive $200 billion mark.

Debt is expected to sit at 24.7% of the state economy this year, easing only slightly to 24.4% by decade’s end. Economists say the state’s rapid debt accumulation over the past 12 years limits future spending flexibility and requires strict fiscal discipline.

Former Commonwealth Bank chief David Murray, who helped lead the rescue of the government State Bank of Victoria in the early 1990s, warned that Victoria’s financial trajectory is so poor it could eventually require a federal bailout, arguing that the state lacks assets to sell and has mismanaged its budget.