Victoria’s economic chickens come home to roost

When the state Labor government took office in 2014, Victoria had very low debt.

However, after more than a decade of poor financial management and waste, Victorians are now the highest-taxed people in the nation, and the state is the most indebted, with the poorest credit rating.

Victoria’s debt binge has been brought about by profligate spending on the public service, which has ballooned in size, as well as infrastructure, which has been mired in rorts and CFME corruption.

Moody’s last week warned that Victoria is heading for a severe debt‑affordability crunch, with interest costs set to consume one in every ten dollars of state revenue by 2030 (up from 3.5% in 2019).

With one in every 10 dollars of revenue projected to go towards debt repayments, there will be fewer funds available for services and basic infrastructure, such as fixing potholes.

It also means that the government will try to squeeze Victorian households and businesses harder for extra tax revenue.

Last week, the latest employment data from the Australian Bureau of Statistics (ABS) revealed the sorry state of the Victorian economy.

While Australia’s official unemployment rate remained steady at 4.4% in June, with more than 76,000 people finding work, the Victorian jobless rate rose from 4.9% to 5.1% – the state’s highest level since October 2021, when it was enduring its sixth COVID-19 lockdown.

Chart from Alex Joiner at IFM Investors

The gap between the Victorian and national unemployment rates is now the biggest in decades, with Victoria’s underemployment rate of 7.3% also the highest in the country.

Victoria’s 5.1% unemployment rate recorded in June was also well above the 4.75% forecast in the recent state budget:

Chart from Alex Joiner at IFM Investors

Victoria’s poor June unemployment figures have fueled ongoing speculation that Premier Jacinta Allan will face a leadership challenge before the state election in November.

The 5.1% unemployment figures for the state were released as Victorian teachers went on strike, with both Allan and Education Minister Ben Carroll “going to ground” on Thursday, with Allan in Adelaide for Labor’s national conference while Carroll was understood to be sick.

With Victoria’s parliament to resume this week, there is said to be growing talk that a cross-factional delegation will request Allan to stand down or urge Carroll to challenge her.

Replacing Jacinta Allan with Ben Carroll is like shuffling the deck chairs on the Titanic.

Victoria is a cautionary tale of what can happen after 12 years of incompetent and wasteful government. The rest of Australia should take heed and not become like Victoria.