The public finance guru who helped repair Victoria’s budget under Jeff Kennett and costed Daniel Andrews’ 2014 campaign promises says the major parties must rein in spending ahead of the election, with debt a major concern for voters and a threat to the state’s economic prosperity.
Fresh analysis by The Age reveals both major parties are increasing spending and promising sweeping handouts – with limited and sometimes questionable savings to offset their cost – as experts warn that a “business as usual” approach to campaign spending will worsen Victoria’s debt crisis.
Bob Officer, who audited finances for the incoming Kennett and Howard governments before being tapped to help Labor in 2014, said “sweetener” policies – like road toll caps offered by both parties and Labor’s public transport fare discounts – were unsustainable.
“It’s easy to spend money – it’s hard to raise it,” he said. “And of course, going into election, governments love to spend it because that’s what people focus on.
“It’s a time for belt tightening rather than further expenditures.”
An analysis of Labor and Coalition election commitments listed by the Parliamentary Budget Office and announced by the parties via media releases reveals both sides are ramping up their spending ahead of polling day on November 28.
Although the campaign is yet to officially begin, Labor has already promised to spend an extra $4.1 billion if re-elected, including $2.7 billion on roads and $206 million to cap weekly public transport fares at $30.
Labor has identified $3.1 billion in savings, including $2 billion by cost-cutting on the Suburban Rail Loop – although half of that remains subject to an independent technical review – and $798 million by delaying level crossing removals.
The Coalition has promised to spend almost $8 billion on new initiatives if elected, according to policies it has costed and published in media releases, including new and upgraded roads and hospitals. This figure does not include some major uncosted commitments, such as hiring 3000 extra police officers and building new schools.
RMIT emeritus professor of public policy David Hayward has estimated the Coalition’s promised tax cuts would cost a further $7.6 billion over its first term if elected, although Opposition Leader Jess Wilson said at The Age’s Melbourne Assembly on Wednesday that the figure was “much closer to $5 billion”.
The Coalition’s savings plan currently adds up to about $7.6 billion over four years. This includes $5.5 billion from its back-of-house public service hiring freeze, $578 million from selling Melbourne’s wholesale fruit and vegetable market, and $1.27 billion from winding up venture capital fund Breakthrough Victoria – although The Age previously revealed that would only save $387 million.
Speaking at The Age’s Melbourne Assembly, Wilson and Premier Ben Carroll laid out contrasting plans and philosophies towards the state’s debt pile, which is soaring towards $200 billion by the end of the decade.
Carroll described himself as a “financially responsibly, socially progressive premier”. While he pointed to savings in future expenditure he had identified since coming to the job, he backed the government’s approach since the pandemic of stabilising and reducing debt as a share of the state economy.
He said government borrowing had funded about $500 billion worth of public assets, like the Metro Tunnel and a dozen new hospitals. “You cannot look at the debt without looking at the assets,” Carroll said, adding he would have more to say on debt closer to the election.
Wilson advocated for more urgent fiscal repair. She said the state’s annual interest bill was “cannibalising” the budget and the state’s finances needed to be returned to an overall cash surplus so that debt could be retired. “There is a moral imperative to reduce Victoria’s debt,” she declared.
“Debt isn’t an abstraction on a budget paper. It’s a bill, and someone always pays for it,” Wilson told the Melbourne Assembly. “We can have a plan to pay for it now, or we can leave it to our children. Labor’s debt is a bill we are handing to the next generation.”
She has promised to release independent costings for all the Coalition’s policies before polling day.
Martin Codina, the executive director of AMPLIFY, a non-partisan advocacy group which is campaigning to put debt at the centre of the Victorian election campaign, welcomed the contest of ideas.
”Comments by the premier and opposition leader at the Melbourne Assembly confirm that Victoria’s debt and fiscal position are the central issue of this election,” he said. “Without a credible plan to stop borrowing and start paying down debt, anything promised during the election has to be taken with a grain of salt.”
Officer said the planned spending and savings released by both parties so far created an “incomplete” picture for budget repair. He said election sweeteners were “kicking the debt ball down the track, hoping that others will pick it up in the future”.
“It’s supposed to win votes, but if you’re an economist, it’s very hard to justify.”
Terry Barnes, a former adviser to state and federal Liberal ministers, said the Coalition and Labor needed to slow their pre-election spending. Barnes said Wilson’s policies were good and targeted Labor’s weak points, but the Coalition needed rein in spending so, if elected, a Wilson-led government could adequately address debt.
“[The Coalition] is going to take a lot of stick, a lot of scare campaigning from Labor over the next six weeks, and Jess Wilson and her people need to hold their nerve.”
By the end of the decade, interest repayments on Victoria’s debt will exceed $11.79 billion a year – more than what the state government will earn from payroll tax, its biggest source of state income.
Independent economist Saul Eslake said the cost-of-living handouts promised by both major parties that were not targeted to low-income Victorians were “irresponsible” and poor policy.
Eslake said the promises could be inflationary and would add to Victoria’s growing debt and result in higher interest repayments, ultimately coming at the expense of essential services.
“Unless and until Victoria starts to run cash surpluses, not only can’t it begin to repay debt, it actually can’t stop adding to debt,” Eslake said.
At a briefing earlier this month, ratings agency S&P also warned election spending could affect Victoria’s financial position.