Major Victorian infrastructure projects, the public service and community health funding will be slashed in a state budget one government source says will be unlike any other the Labor government has delivered.
As the government works to get the state’s finances back on track post-Covid, Daniel Andrews on Sunday warned Victorians there would be “very difficult measures” in the May budget. This is despite Labor committing to delivering billions of dollars worth of promises made in the lead-up to November’s state election.
“It will not be a budget we are used to seeing in Victoria,” a senior government source, who is not authorised to speak publicly about budget deliberations, told Guardian Australia.
A Labor MP said recent language used by the government regarding the budget was not a case of expectation management.
“It’s going to be bad. They’re not over-egging it,” they said.
Both sources said it is expected the brakes will be slammed on major infrastructure projects, singling out the Geelong Fast Rail and Melbourne Airport Rail. It follows reports the New South Wales government is also considering pausing projects due to cost blowouts.
According to Treasury’s pre-election budget update, Victoria’s net debt is forecast to surge from $116bn in 2022-23 to $166bn by 2025-26, which is equivalent to 26.5% of gross state product.
Interest payments on state debt was forecast to total $7.5bn in 2025-26, up from $3.9bn in 2022-23. At the same time, revenue from the GST and property stamp duties is likely to dip.
“Our budget will be delivering on all the election commitments that we made. Beyond that, it will have to have some very difficult measures within it because for the best of reasons at the worst of times, we went and borrowed billions and billions of dollars to get us through a one-in-100-year event,” Andrews said on Sunday.
“We need to make some really difficult choices.”
Almost $672m was allocated to the Melbourne Airport rail project in last year’s state budget for early works, as part of a $5bn commitment that was matched by the federal government.
A further $123m was allocated to the Geelong Fast Rail, of which the state and federal governments have committed $2bn each.
The latter was announced by the then prime minister, Scott Morrison, on the eve of the 2019 election, but it is not known how much the Albanese government intends to contribute to the project.
On Monday the state’s transport infrastructure minister, Jacinta Allan, said the two governments were “still in the process of making final decisions” on the projects, but that there was “significant pressure” on meeting the 2029 deadline for Melbourne Airport Rail.
She said if there were “changes” to projects, it was her expectation any federal funds would “stay within Victoria”.
Guardian Australia also understands the secretary of the Department of Treasury and Finance, David Martine, has written to other department heads ordering them to detail plans to cut their budgets by 10% without harming “frontline services”.
The Community and Public Sector Union (CPSU) estimates this could lead to 6,000 job cuts.
“It insults people’s intelligence to play this frontline versus others game as if there’s some second-class job that can be cut because it’s in a supporting role to others that directly deliver the service,” the CPSU’s Victorian secretary, Karen Batt, told Guardian Australia.
“It means government will exempt every politically sensitive area but they’ll impose the cut in the support roles, which wipes out the service delivery anyway as more so-called ‘frontliners’ spend more time doing those support roles.”
The government is expected to spend about $33.5bn on wages this financial year, the equivalent of about 40% of its revenue.
The government has also flagged changes to the state’s Workcover scheme, given benefits paid to injured workers exceed the premiums paid by business to fund the scheme by about $1.1bn a year.
On Friday 45 community health services were told to brace for cuts of up to 15%, mostly targeting preventive and education programs around vaping and obesity.
