Victoria’s sinkhole economy requires federal bailout
The latest Victorian Budget revealed that net debt will hit around $200 billion within four years.
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.
“Victoria doesn’t have any assets to sell and why should the rest of Australia pay to bail them out?”, Murray said.
Victoria has already received bailouts from the federal government in the form of a generous GST allocation (at the expense of NSW):
In 2026-27, Victoria will receive $1.4 billion more in GST revenue than NSW, despite having 1.5 million fewer people:
The Albanese government also committed billions of dollars in extra funding for Victoria’s Suburban Rail Loop (SRL), despite it failing multiple cost-benefit analyses.
The AFR has revealed that former Victorian treasurer Tim Pallas asked federal treasurer Jim Chalmers to fund 50% of Victoria’s 2024 Economic Growth Statement.
The ministerial brief shows Victoria planned to seek even more federal money if the initial request succeeded.
However, no funding was provided, and Chalmers did not respond to the request.
Victoria had been rated the worst state for doing business, due to:
- High taxes
- Heavy regulation
- Debt projected to exceed $200 billion
Since the 2024 economic statement, Victoria’s economy has contracted on a per capita basis over two years, and the outlook has worsened.
Westpac forecast a sharp economic slowdown in Victoria, with consumption per capita expected to fall below pre‑COVID levels and inflation rising to 4% by 2026.
Westpac also forecast a deepening per-capita recession in Victoria and warned that the state faces elevated risks compared with other jurisdictions.
Rating agencies criticised the May 2025 budget for spending revenue gains instead of reducing debt.
The reality is that Victoria has become the nation’s economic sinkhole. It is overregulated, overtaxed, and has no competitive advantages over the other main states.
The rest of Australia already heavily subsidises Victoria. Expect more bailouts in the future as financial incompetence drowns the state in its debt.
