With Labor struggling ahead of next month’s Victorian election, and the Liberals well placed to win office for only the second time since the 1990s, it’s time to look at Labor’s fiscal and economic record over the past 12 years.
Victoria’s budget since 2014 falls into three distinct stages: the early years of fiscal discipline, the pandemic, and then an era of astonishing profligacy. Using actual outcomes for each year in the budget papers, we can track Labor’s performance. The new Andrews government inherited net debt of just 6% as a proportion of gross state product (GSP). Over the next five years, Labor got that down to just 5% before the pandemic hit, including net debt hitting just 3.9% in 2016-17.
Part of that was due to strong economic growth, but Labor also lifted taxation — taxation receipts were around 4.8% of GSP in the last year of the previous Liberal government but averaged 5.3% in the following five years. Spending as a proportion of GSP, however, only grew slowly, from 14.3% of GSP in 2013-14 to an average of only 14.6% in the following five years.
Then the pandemic hit. Spending, justifiably, surged: 16% of GSP in 2019-20, 18.4% in 2020-21, 18.8% the following year. As a result, net debt hit nearly 20% in 2022 before Dan Andrews began cutting back spending as the pandemic subsided — spending fell back below 17% of GSP in 2022-23.
But under Jacinta Allan, who took over in September 2023, spending never returned to its pre-pandemic levels.
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After bottoming out at 16% of GSP in 2023-24, this year it’s forecast to be around 16.2%, after hitting 16.6% in 2025-26. And while Allan has also jacked up taxes — tax receipts went over 6% of GSP in 2023-24 and are forecast to remain there — that hasn’t been enough to prevent a further surge in net debt far above the levels of the pandemic: 23.7% in 2024-25; 24.7% in the year just finished; 24.9% forecast for this year.
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Taking out the special circumstances of the pandemic, Victorian Labor has tracked a very familiar path for many governments, state and federal: initial fiscal discipline giving way to higher spending and a loss of control of debt. The pain for Victorian taxpayers will be enduring. Interest costs were around $2 billion a year in the mid-2010s; they’re forecast to hit around $9 billion this year. As a proportion of GSP, that’s a doubling. They’re expected to reach nearly $12 billion by 2030.
In employment terms, Victoria looks to have underperformed recently. In 2014, unemployment was 6.7%, 0.4 points above the national average. Currently it’s 5.2%, 0.6 points above the national average. Indeed, Victoria currently has the worst unemployment in the country, ahead even of Tasmania, though it has only the second-highest youth unemployment rate, behind the Apple Isle. This underperformance, however, is relatively recent: in 2019, Victoria averaged an unemployment rate well below the national average — 4.75% compared to 5.2%. It was only following the pandemic that unemployment nationally became significantly lower than in Victoria, where unemployment was stuck well above 4% from early 2024.
Where Victoria has outperformed is on participation: nationally, participation grew from 64.5% to 67.1% between 2014 and now, but in Victoria it grew from 64.6% to 67.8%, with a particularly strong gain in female participation. Its poorer performance on unemployment partly reflects a proportionally bigger workforce — Tasmania, in contrast, has abysmal participation permanently stuck at around 60%. The state has also increased its share of population from 25.2% when Andrews was elected to 25.6% now.
This is a state, and a government, that lost its way after the pandemic. It never restored the spending discipline of its first years, it taxed its citizens more and more heavily, debt and interest payments soared, and it failed to recover its strong employment record. Whatever the outcome on November 28, Victorians have a long road ahead to recover from the failures of the last three years.