In a world kept afloat by an ever-rising tide of debt, Victoria’s Labor government is acting according to script. And that is to write a budget that will see the state’s debt double to $55 billion over the next four years.
And this during one of the Victoria’s worst housing downturns in history.
Yet a day after the state budget was delivered, Premier Daniel Andrews backed his government’s plans to upsurge Victoria’s debt, telling ABC radio on Tuesday:
‘We are delivering on our commitment to borrow to build the infrastructure that we need…
‘The alternative would be to not build these things.’
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Andrew’s on the defensive
Defending his stance, the premier compared the situation that by telling the state not to into debt it like telling people ‘don’t buy your house until you can pay cash’.
‘Borrowing money when borrowing costs are very low, borrowing at a responsible level is exactly the right thing to do,’ he added.
Andrews also noted a $1 billion surplus for the 2019/20 outlook. This is simultaneous to a $5.2 billion property stamp duty write down and acknowledgement from ratings agencies showing that the government’s planned spending was something the state could afford, AAP reports.
Ratings agency Moody’s stated that the state’s increasing debt was manageable within it triple-A credit rating. However, S&P Global Ratings said that the downturn in the housing market will place pressure on Victoria’s operating margins and new taxes will only somewhat balance the gap. They the then added that the argument to increase public sector employees will be a challenge, according to AAP.
Similarly to other states, Victoria’s budget is unprotected against falls in property transfer taxes, the Australian Industry Group cautioned.
Opposition rebukes Andrew’s claims
‘There is a need to develop an approach to make the state’s revenue more sustainable and less in need of calling on ad hoc revenue sources,’ AI Victoria chief Tim Piper said.
Opposition Leader Michael O’Brien criticised the government on their spending during a downturn and pointed out that ratings agencies noted that there was a lack of wiggle room in the budget:
‘Daniel Andrews and (Treasurer) Tim Pallas have put way too much reliance on debt and way too much reliance on the property market roaring back, because if that doesn’t happen we are all in deep trouble here in Victoria’.
O’Brien claims there needs to be a ceiling on state debt, as well as a tighter leach on project budgets, due to the cost of a number of infrastructure builds going over budget.
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