'DICTATOR DAN' IS LONG GONE BUT HIS BUDGET DEBT MENTALITY REMAINS

Same Treasurer, different Premier - even more debt. That's the story of today's Victorian budget, handed down by long term state treasurer Tim Pallas.

It is the first state budget delivered since Dan Andrews retired as Premier, making it new Premier Jacinta Allan's first since she took charge - but that's pretty much all that's changed. Increasing taxes and broken election promises are littered throughout this budget.

While points for effort need to be awarded when it comes to attempting to clean up the fiscal disaster she inherited, spending is still rife and debt continues to balloon.

Which isn't exactly surprising given that this is Pallas' 10th budget as Treasurer: he was never likely to do a compete U-turn from his handywork during the Andrews years.

That included racking up debt on a scale not seen anywhere else around the country in recent years, in response to the covid pandemic.

The new Premier is hoping to tax and spend her way out of trouble, but it is unlikely the fragile Victorian economy will bear such a burden. That said, businesses will welcome some light payroll tax relief announced in the budget.

This budget's forward estimates reveal a debt burden far in excess of what other states are carrying for years to come, which is one reason why the Covid levy introduced last budget has been extended in this one.

This will cause more pain for investors in Victoria, and is arguably why business continues to desert Melbourne as property prices also slow.

Don't be fooled by the illusion of a surplus out into the future either. That is reliant on forecasts that might not hold up, nor survive the cut and thrust of election campaign promises.

Unemployment is forecast to rise, economic growth predictions are generous to say the least. Meanwhile the state government's tax take will rise from $39b this financial year to a whopping $45b in three years time. Property tax rises are amongst the upsurge.

The impact of the state's debt burden won't only be felt in Victoria either. The ongoing Covid levy will put a hole in Federal Treasurer Jim Chalmers numbers, as he plans for federal Labor's budget to be delivered next Tuesday.

That's because of the Commonwealth deductions the Victorian levy allows for. Apparently heated conversations were had between state and federal treasury officials in the days leading up to this budget.

There was never going to be an easy way out of the fiscal mess Andrews left behind when retiring with his fat parliamentary pension for life.

Cutting and running might be the appropriate term to use, if the polls hadn't revealed that most Victorians wanted to see the back of him by the time Andrews did step down.

Yes, the ill-fated Commonwealth Games bid (and formal acceptance) has cost hundreds of millions of dollars, but it is the multi-billion dollar cost of pandemic assistance and shutdowns that will take the Victorian economy decades to recover from.

The slowness of it is worsened by the high interest rates environment, making paying down so much debt even harder. This financial year alone the interest bill on state debt will be $6.5b, nearly $1,000 for each and every Victorian.

While there is an economic argument that Allan should have done more quickly to repair this budget - worsening the short term pain for Victorians with fewer handouts, but at least limiting the length of time the pain will persist - she has chosen a more political path.

There are cost of living measures, such as a $400 handout to parents at government schools. 700,000 Victorian students will be eligible and their parents will receive it before the start of the 2025 school year.

Allan doesn't want to end her political career as a one-term wonder, never endorsed by Victorians at the ballot box. A mere factional selection in the wake of the Andrews years is not the legacy she wants.

Allan wants to emulate Anna Bligh after she took over from Peter Beattie in Queensland, winning a subsequent election to cement her standing.

But there are fair questions as to whether or not more spending elongating the fiscal pain will help achieve that, even if new cost of living relief is welcomed by voters with open arms.

Is it possible Victorians would have rewarded her for breaking with the Andrews tradition of spending money the state doesn't have?

Especially considering the dire state of the Liberal Party in Victoria?

Perhaps, but a tougher budget as a political course of action might have come too late had it been deployed now.

Melbourne based pollster from Red Bridge, Tony Barry, says: 'our focus groups show that Jacinta Allan needs to make sure she doesn't just get painted as Dan Andrews' understudy. She must differentiate herself from him if she wants to win the next election. Up until now voters have seen her as just a blank canvas.'

Not since the 1980s has Victoria entered a death spiral on debt requiring government's to make difficult choices.

The next state election is due in 2026. While that is still more than two years away, it is going to take time, lots of time, to 'fix' the Victorian economy.

The repair work probably needed to start in last year's budget, but that was treated like a swan song by Andrews, rather than an acknowledgment of fiscal failure that needed a proper reset.

2024-05-07T03:46:44Z dg43tfdfdgfd