It’s a time-honoured tradition the day before any budget: the treasurer poses for TV crews and photographers with the document they spent months preparing.
Sometimes, treasurers are a little awkward in front of the cameras. Often, they are coy. But they almost always crack the same joke – that people will have to wait just one more day to find out what’s inside the budget.
Yet most of the time, political tragics and policy wonks usually already know what’s included, thanks to a steady stream of pre-budget announcements and picture opportunities.
For the eight years the Victorian Labor government has followed this tried and tested formula. But ahead of treasurer Tim Pallas’ ninth budget on Tuesday, its approach has been noticeably different.
While Pallas agreed to pose for images with the document, there has been no significant pre-budget announcement. The post-budget drinks for Labor MPs are cancelled, to avoid them being seen as celebrating what many have privately described as a “horror” budget.
Late on Monday, the government released some statistics: a predicted $1bn surplus in 2025/26, an improvement on the $900m forecast in the pre-election update in November; and another $1.2bn surplus the following financial year.
But the government did not confirm the figures for the 2023/24 or 2024/25 financial years (deficits were forecast for both years in November) or release information regarding the state’s total debt.
Victoria’s premier, Daniel Andrews, considered a master communicator by those who love or loathe him, has also been very intentional with his framing of the budget. He has repeatedly described it as “tough”, “difficult”, “challenging” and “painful” – and publicly blames the pandemic and the Reserve Bank.
Andrews recently said the government had to borrow billions to save lives, support businesses and keep people in jobs during Covid-19 lockdowns. He said it did so at the direction of the Reserve Bank governor, Phillip Lowe, who he claims briefed national cabinet that Australia could face a 25% unemployment rate if it didn’t.
According to Andrews, the federal, state and territory governments were told interest rates wouldn’t be going up anytime soon.
Instead, the bank has increased the official cash rate 11 times in 12 months.
The premier’s comments that interest rate rises were “smashing families” and not effectively fighting inflation has likely resonated with many Victorians struggling with increasing mortgage repayments and the cost-of-living crisis.
But the comments fail to take into account that in June 2019 – before the pandemic – Victoria already had accrued debt totalling $25.4bn, or 5.5% of the state economy. At the time, debt was forecast to rise to $54.9bn by 2022/23.
This was due to a huge infrastructure agenda that included level-crossing removals, Melbourne Airport Rail and the North East Link. Major projects were since hit – due to factors not limited to Covid – by skills shortages and increased costs for materials.
With the federal government reviewing its infrastructure commitments in light of these pressures, the infrastructure minister, Jacinta Allan, last week announced a pause on the next stage of works on several projects, including the multibillion-dollar airport rail link.
Adding in the Covid borrowings, Victoria’s debt is now forecast to surge from $116bn in 2022/23 to $166bn by 2025/26, according to Treasury’s pre-election budget update, equivalent to 26.5% of the state’s economy.
By 2025/26, interest payments on state debt was forecast to total $7.5bn. These figures are unlikely to improve in Tuesday’s budget.
Last week, Andrews sought to differentiate between “economy-growing” debt and borrowings during Covid: he likened the former to a mortgage; the latter, a credit card.
“Covid debt’s a bit more like a credit card, and we have to get that balance back down to zero,” Andrews said.
It’s not yet known how the government plans to pay the debt down, but it’s expected there will be a combination of savings, including by cutting the public service, and new revenue measures.
Allan, who rebuffed more than a dozen budget-related questions at a press conference on Monday, said measures to pay down the Covid debt would not impact families.
“This will not be something placed on hardworking families who’ve already gone through a really difficult 12 months with 11 interest rate rises,” she said.
The big question is: who will end up paying for it?
