Article by Editorital, courtesy of The Australian
25.11.2025
The $50.6bn hole blown by Labor in the Victorian budget across six years underlines the financial incompetence of Jacinta Allan’s government and, before it, that of her mentor and adviser, Daniel Andrews. The Victorian Auditor-General’s report released on Monday warns the government is prioritising short-term fixes over strengthening long-term financial resilience.
The state’s annual financial report reveals gross debt is $187.9bn, up from $168.8bn last year and set to reach $236.6bn by mid-2029. The threat created by Labor to the financial stability of the nation’s second most populous state shows the mammoth challenge facing new Opposition Leader Jess Wilson to devise policies acceptable to voters to tackle the malaise in what is already the highest-taxed state.
It cannot be avoided. Interest costs on the debt cost Victorians $20m a day and a quarter of state debt is owed to overseas creditors whose identities Labor insists on keeping secret.
Victoria’s parlous situation exemplifies the risks to the national economy identified by economists, who warn federal and state spending could keep inflation high, resulting in fewer interest rate cuts from the Reserve Bank. As the Albanese government spruiked more big spending – its multibillion-dollar student debt relief – in the last parliamentary sitting week of the year, Matthew Cranston reported that growth in government consumption was rising at 4 per cent annually while public-sector wage costs were climbing by 9.5 per cent.
Such a disproportionate hike in public-sector wage costs is not in the nation’s interests when spending restraint is needed federally and across states and territories to cut debt. Public service wages and infrastructure spending are major problems in Victoria.
Former Productivity Commission chairman Michael Brennan says federal and state governments must change their spending habits or risk a blowout in personal income taxes. Combined corporate and personal tax receipts have hit their highest share of GDP since the introduction of the GST in 2000, providing 71 per cent of government revenue raised.
Economic think tank E61, which Mr Brennan heads, predicts middle and lower-income workers will end up footing the bill for higher taxes because of bracket creep. The situation demands a fresh mindset. Governments must break their addiction to spending or taxes as a share of GDP will soar, hurting living standards and growth. And voters must understand that government funding so many facets of life comes at a financially painful price.
