For decades, the Victorian Coalition has traded on the idea that it is a better economic manager than Labor. Which makes it surprising to see it has so far pledged $19bn more than the government on election promises, while simultaneously vowing to bring “wasteful spending under control”.
The Parliamentary Budget Office (PBO), which tallies political parties’ election commitments ahead of the November election, shows at the time of writing the opposition has announced 216 promises, of which 165 are funded, at a cost of $24bn.
This includes commitments within the past week to cap the daily fare of public transport in Melbourne at $2 and halve regional fares. Experts have raised concerns about the viability of the plan but it was well received by voters struggling with cost of living pressures, which has left some in Labor’s ranks rattled.
According to the PBO, the $2 public transport cap will cost $1.3bn over four years, while the estimated cost of halving regional fares was not disclosed by the opposition.
The opposition maintains both commitments will be paid for by reining in “Daniel Andrews’ spiralling debt and wasteful spending”, under “stage one” of the Coalition’s “long-term economic plan”.
The plan includes a legislated debt cap to prohibit any future government from exceeding the limit without parliamentary approval.
The shadow treasurer, David Davis, is yet to specify what the limit will be, arguing he needs a clearer sense of the state’s financial position to do so.
The plan includes the opposition’s commitment to shelve the $34.5bn Suburban Rail Loop project to pay for new and upgraded hospitals (though less than $10bn is freed up by doing so) and a comprehensive audit of Labor’s major projects.
“Our debt cap will bring wasteful spending under control. There will be no new taxes. There will be no cuts – the only cuts will be to Labor’s wasteful spending,” the Liberals said earlier this month.
Davis has warned, as recently as Friday after the release of treasury’s annual financial report, that the state’s predicted net debt of $167.5bn by 2025-26 will “exceed that of New South Wales, Queensland and Tasmania combined”.
This is equivalent to about 7% of total revenue, the highest proportion since the mid-1990s when it hit 14%.
At the time, the state’s precarious economic situation led the then premier, Jeff Kennett, to embark upon an austerity program that involved cutting more than 45,000 public service jobs, the closure of hundreds of schools and hospitals and the privatisation of billions of dollars worth of public assets.
But David Hayward, an emeritus professor of public policy and the social economy at RMIT University, says that’s “no comparison” to the current economy and “no justification for panic”.
“There’s no reason for people to become obsessed with the state’s debt. It’s time the analysis shifted from debt to looking at the assets the government has accrued or how it has used that money,” Hayward says.
He says about two-thirds of Victoria’s debt was incurred during the pandemic, to prepare the health system and support jobs and businesses.
“I don’t think anybody would argue that it would have been better not to have had that health investment. People would have died,” Hayward says. “As for the infrastructure spend, think about all the assets that have been built up as a result.”
Friday’s annual financial report showed the state’s 2021-22 deficit was $13.8bn, an improvement of $3.8bn from when the budget was handed down in May.
The treasurer, Tim Pallas, credits this to lower than forecast demand for Covid testing and PPE, and an additional $1.2bn in revenue as the economy bounced back.
Net debt was just under $100bn, equivalent to about 19.4% of the state’s economy, $2bn lower than the budget estimate.
As for election commitments, Labor has made 31, all of which are funded, at a cost of $5bn.
However, the election commitment tracker doesn’t take into account government announcements, which means projects such as the $6bn new medical precinct and upgrades to the Royal Melbourne and Royal Women’s hospitals, are not included in the tally, despite the important role they will play in Andrews’ campaign for a third term in office.
As the campaign begins to ramp up and more promises are made, how each party spruiks their economic management credentials will be interesting to watch.
