Victorian sinkhole economy may require federal bailout
The Victorian Budget, released on Tuesday, shows that net debt is projected to peak at about $199 billion within four years, just under the politically sensitive $200 billion mark.
Debt is expected to sit at 24.7% of the state economy this year, easing only slightly to 24.4% by decade’s end. Economists say the state’s rapid debt accumulation over the past 12 years limits future spending flexibility and requires strict fiscal discipline.
Former Commonwealth Bank chief David Murray, who helped lead the rescue of the government State Bank of Victoria in the early 1990s, warned that Victoria’s financial trajectory is so poor it could eventually require a federal bailout, arguing that the state lacks assets to sell and has mismanaged its budget.
“Victoria doesn’t have any assets to sell and why should the rest of Australia pay to bail them out?”, Murray said.
Meanwhile, Westpac this week forecasts a sharp economic slowdown in Victoria, with consumption per capita expected to fall below pre‑COVID levels and inflation rising to 4% by 2026.
Westpac also forecast a deepening per-capita recession in Victoria and warned that Victoria faces elevated risks compared with other states.
The reality is that Victoria has become the nation’s economic sinkhole. It is overregulated, overtaxed, and has no competitive advantages over the other main states.
Victoria has already received bailouts from the federal government in the form of a generous GST allocation (at the expense of NSW):
Amazingly, in 2026-27, Victoria will receive $1.4 billion more in GST revenue than NSW, despite having a population that is 1.5 million smaller:
The Albanese government has also committed billions of dollars in extra funding for Victoria’s boondoggle, the Suburban Rail Loop (SRL), despite it failing multiple cost-benefit analyses.
Victoria is already heavily subsidised by the rest of Australia. Expect more bailouts as financial incompetence drowns the state in its debt.
