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The state government spent an extra $2.8 billion between July and September fighting Victoria’s outbreak of the COVID-19 Delta variant.
The state finished the September quarter with its budget nearly $7 billion in the red and with net debt out to more than $82 billion, according to the latest figures from Treasury and Finance.
Melbourne’s CBD was almost deserted during this year’s lockdowns.Credit:Paul Jeffers
The full impact of the crisis on Victoria’s public finances will not become clear until early 2022.
The state opposition said the latest figures from Treasury made “grim reading”, but credit ratings agency Moody’s Investors Service told The Age the state’s finances looked in better shape than they did a year ago. It said strong employment and soaring house prices looked set to drive a solid recovery.
The government spent $24.4 billion in July, August and September, about $2.8 billion more than expected, with extra spending attributed to the higher healthcare costs and the massive business support packages.
Treasury said it borrowed more than it expected – about $9.5 billion – to finance the government’s response to the COVID-19 pandemic and to help fund the Andrews’ government’s signature “Big Build” infrastructure program.
But the department urged caution in using the financial report to predict a disastrous outcome at the next State Budget, to be published in May, pointing out that much of the state’s revenue from taxes, levies and Commonwealth grants would come in later in the financial year and the heightened spending of the lockdown months would subside.
Treasurer Tim Pallas said the figures were stronger than those of the June and September quarters of 2020 and the economy was poised to bounce back as the state approached 90 per cent vaccination coverage of the eligible population.
But shadow treasurer David Davis was not convinced, saying the figures pointed to a large blowout in the state’s deficit when the full year’s numbers are published next year.
Victoria’s Shadow Treasurer David Davis says the latest figures on the state’s debt are frightening.Credit:Penny Stephens
“The $6.8 billion reported deficit is 60 per cent of the full-year forecast deficit, with nine months of Daniel Andrews’ and Tim Pallas’ reckless spending and project mismanagement to come,” Mr Davis said.
“There is no doubt the $11.6 billion full-year deficit forecast from transactions will blow out by billions.”
Mr Davis said the latest net debt figures were “frightening”.
“Andrews and Pallas are racking up debt at a frightening pace, in part due to their waste and mismanagement of major projects, which are billions and billions of dollars over budget,” Mr Davis said.
“Appropriate spending on COVID-19 recovery is important, but with Victoria’s unemployment rate the worst in the nation, it is clear Andrews’ prolonged lockdowns have wrought terrible and unique damage on Victorian small businesses, lives and livelihoods, and his COVID recovery efforts have not borne fruit.”
Moody’s, which downgraded the state’s credit rating in February, said it saw nothing alarming in the Quarterly Financial Report.
“On balance, the update is broadly in line with what we expected to see post-Delta,” said Moody’s lead Victorian analyst, John Manning.
He expected billions of dollars in federal health funding, which is paid in arrears, to flow in the coming months and improve the budget position, with the government no longer having to find billions of dollars in COVID business support payments.
“A lot of those things will wash out over the year,” he said.
Mr Manning said he also expected to see strong economic growth in Victoria, driven by a strong jobs market and the “wealth effect”; the economic term for the consumer confidence sparked by rising house prices.
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