Analysis on Treasurer Jaclyn Symes’ state budget and the state’s rising interest bill
Reality is biting into the Victorian budget. To be more precise, it’s a $50 billion cut from the money this government has, and the government that follows it will have to pay for the services and infrastructure that people need.
This huge figure is the cumulative interest the government must repay on loans taken by the Andrews and Allan governments this financial year and over the next four years.
This year’s bill is 7.85 billion dollars. By 2029-30, this figure is estimated to be $11.8 billion. There are a lot of numbers in the state budget released on Tuesday, but let’s settle for these for now.
The cost of debt repayment increases by 50 percent in the later years of the budget.
It is the fastest growing expenditure item in the budget and ranks second. It is growing at two and a half times the debt rate. More on this later.
Finance Minister Jaclyn Symes describes her second budget as a document of careful choices and difficult decisions, and in some ways it is. In its 12th and perhaps final year, the government has turned its sights away from the distant horizons of megaprojects to smaller, more pressing domestic problems.
“This budget is about getting to the heart of that feeling,” Symes said. “It’s about helping with living expenses. It’s about giving families more time in the day.”
It is a budget that reflects warmth and care.
But the cold, hard cost of servicing debt, the cost of global inflation, rising interest rates and the government’s refusal to pay some of its debts will make already difficult decisions even more difficult in the future.
$11.8 billion is more than the cost of the West Gate Tunnel. This is the amount of taxpayers’ money the government says it will spend on the first stage of the Suburban Rail Loop. That’s more than next year’s annual allocation for any government service except health and education.
By 2029-30, 10 cents of every dollar of revenue the government collects will go to paying interest on the debt. And this figure will continue to rise, perhaps sharply, as the yield on government bonds (the government’s interest rate) returns to normal levels from the free money period of the pandemic years.
Some of the reasons for this, as Symes has repeatedly pointed out, are beyond the control of the Victorian government or any government in Australia. The budget speech was full of references to Donald Trump’s war in the Middle East and the global oil crisis, which has led to a rise in inflation and a corresponding rise in interest rates.
But amid Symes’ difficult choices – and those in which Prime Minister Jacinta Allan, senior ministers and backbench MPs are pushing for election-year measures to soften Labour’s offer to voters – the Treasurer has other decisions to make.
Since Symes handed over his first budget, the government has received an additional $5.3 billion in revenue for this fiscal year. Some of this was due to higher than expected tax collections. Some came from larger-than-expected federal government grants.
It’s all spent. None of it is used to pay off debt; an old-fashioned concept that is completely missing from the budget papers.
RMIT economist David Hayward says this is a continuation of an established trend under the Labor government.
“Every time they get additional money, they spend it,” he says. “They spent all the chocolates.”
The government calculates that voters will be more grateful for the things and services they spend money on, rather than the increasing cost of servicing debt. They’re probably right.
But by choosing to ignore the skyrocketing cost of Victoria’s debt, the government is gambling on more than just the results of the November election.
Start your day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
Chip Le Grand leads our state politics reporting team. He had previously served as the newspaper’s chief correspondent and was a journalist with 30 years of experience.Connect via email.
