Wednesday, 30 August 2023

Statements on tabled papers and petitions

Department of Treasury and Finance

Budget papers 2023–24

David DAVIS (Southern Metropolitan) (17:14): I am pleased to make a statement on a report today, and I want to talk about Victoria’s financial position. It is clear from the Moody’s report recently released on 12 July that the position of the state is very serious. It is deteriorating:

… Victoria’s stand-alone credit profile has weakened in recent years and will continue to do so as sustained infrastructure spending continues to drive debt higher. Despite the underlying strength of the Victorian and broader Australian economy, the state’s debt burden is unlikely to stabilize before the end of the fiscal year ending in June 2028 (fiscal 2028).

That is a very serious position.

… its debt burden will have risen to 226% of revenue, and will continue to rise on ongoing debt funded infrastructure spending.

I am quoting further:

This rapid (and prolonged) growth in debt amid higher interest rates will raise borrowing costs and weaken debt affordability over time … limiting headroom under current rating tolerances.

They talk about a couple of serious credit challenges – the ongoing rise in debt to fund capital spending, vulnerability to external shocks and carbon transition, and sustained fiscal deficits. It is interesting to look at the chart – exhibit 2, as they call it – on page 2 of the report. They look at net, direct and indirect debt and revenues – and it is important to note this – lifting from 99.8 per cent in 2020 to 198.1 per cent in 2024. Net, direct and indirect debt across gross state product is lifting from 14.8 per cent to 29.5 per cent. These are significant deteriorations by any course.

You know, some of us remember the election in 2018, when a couple of days before the election the Premier and his Treasurer Tim Pallas went out and said they were going to lift state debt from 6 per cent to 12 per cent, and now it has gone in this year’s budget to 25.4 per cent and up to 29.5 per cent by 2024. These are very serious lifts in state debt, and they do limit the state’s ability into the future and shift debt onto our children. They shift debt to our children, and they make it harder because taxes will be higher. The ability of the state to provide services, whether they be education, health or other services, will be limited. The report goes on to say Victoria is Australia’s second-largest economy and looks at the position of the Australian economy. They move to a number of key points here:

During fiscal 2023, payroll tax receipts proved more resilient …

so they actually scooped in more. Despite that:

The fiscal 2024 Budget introduced additional taxation measures …

We know that the clobbering through payroll tax and land tax is absolutely smashing so many people. School taxes are extraordinary taxes that people never thought we would see in this state.

On balance however, we see vulnerabilities in the state’s own source revenue profile from fiscal 2024 onwards as rising interest rates further test the resilience of consumer confidence, business investment and housing affordability.

You know, the truth of the matter is actually quite simple: you cannot trust Labor with money. Labor will always damage the economy. They will always damage the budget’s financial position. Ultimately they might get that run, and they might get a few terms where they churn through the money, spending wildly and spending without proper cost containment. We know there is $30 billion in cost overruns on projects, and it is climbing, whether it is the Metro Tunnel or whether it is the West Gate Tunnel. Some of these are good projects in themselves, but they are improperly administered and without proper cost containment. Labor cannot be trusted with money, and there are always problems. They go on to say:

Although debt affordability is currently adequate with interest payments at an estimated 4.9% in fiscal 2023 … interest rates will significantly constrain Victoria’s operating profile over time … interest costs will increase to almost 8.0% of operating revenue by fiscal 2027 …

These are significant hits that are occurring.