Wednesday, 31 August 2022

Department of Treasury and Finance

Budget papers 2022–23

Mr RICH-PHILLIPS (South Eastern Metropolitan) (17:22): I rise to make a brief statement on the budget of 2022–23, and I particularly want to focus on the operating statement and the debt statement, which are areas that are of particular interest to Victorians as we see state debt reach record levels over the forward estimates.

The budget that was brought down in May of this year forecast a deficit of just under $8 billion, but this is on the back of earlier deficits of nearly $18 billion last year and $15 billion the year prior. We have been seeing under this government a pattern of very significant deficits over the last several years. Yes, the explanation, the reason, that is given is the pandemic and the response to the pandemic, but what we are not seeing from this government is the budget being repaired, because over the forward estimates we are still continuing to see substantial budget deficits out to 2025–26, when the Treasurer optimistically suggests there will be a budget surplus of $700 million, notwithstanding the fact that none of the Treasurer’s other estimates in the eight years he has been Treasurer have been met where those estimates have been optimistic. We have consistently seen overspends by this government year on year on year for eight years, so we have very little confidence that the Treasurer, projecting a surplus in three years time, is actually going to be able to achieve that.

Concerningly within the scope of the budget is the growth in debt. We can see in 2020–21 net debt was sitting at $72 billion, and as we know, it is now going to hit $167 billion by 2025–26. What we no longer have in the budget papers is a debt management or debt reduction strategy. A debt management strategy and a debt reduction strategy are things which have been in place for the last 20 years up until very recently. They were a function of the budgets of the Kennett years, when there were major reductions in debt in order to reduce borrowing costs, and they carried on through the Bracks and Brumby years and indeed into the subsequent Liberal government of Ted Baillieu and Denis Napthine.

They were quietly dropped under this government about two years ago, the reference to maintaining debt at moderate levels and the reference to reducing debt over the longer term, and what we see now is no peak in debt over the forward estimates—$167 billion by 2025–26, with no indication from the government where it is going to peak and where it is going to decline. Not only is that in nominal terms, dollar terms—$167 billion—it is also as a share of gross state product. So debt is increasing unabated over the forward estimates as a proportion of the economy, rising to 26 per cent of the Victorian economy by 2025–26, with no downward trend. At no point has the current Treasurer indicated where we will see that debt peak as a proportion of the economy and start to be reduced nominally or, as I said, as a share of the economy.

It is a concern to Victorians that this trend continues unabated. It is fine for the Treasurer to go out and say, ‘We’re building infrastructure and we’ve got a wonderful infrastructure program’, but the reality is around a third of that additional debt is not for infrastructure; it is actually to keep the lights on. It is funding recurrent expenditure year on year on year—this year $8 billion, next year $3 billion, last year $18 billion of borrowed funds to keep the lights on—and that is simply not sustainable.

Victorians are entitled to know when the government is going to address this problem. We have not seen it in the budget this year. We certainly did not see it in the budget last year. The trend we are on with this Treasurer and this government is unsustainable. Victorians are entitled to know if a crunch is coming next year if this government is returned. Are we going to see a horror budget in 2023 if there is a change of government? And if that is not this government’s intention if it is returned, what is the future for debt in this state? Tens of thousands of dollars are now owed per household in Victoria. It is unsustainable, and the government must address it.