Most home owners understand that if you are serious about getting your mortgage under control, you can’t keep borrowing more money to pay for other things.
Tim Pallas would like us to think of the thumping great debt owed by this state as a home owner might a mortgage.
Over the four financial years covered by the budget, the annual interest required to service Victoria’s debt will jump from $6.3 billion to $9.3 billion. This is a serious chunk of change and, as a statistical quirk, the fastest-growing expenditure item listed on the government’s cash flow statement.Victoria’s net debt – the total amount we owe – is forecast to pass $187.8 billion by July 2028 on the way to an unknown, distant peak.
Is it reasonable to think, as Pallas contends, that the Victorian economy – pump-primed by record levels of government spending – can grow the state’s finances out of this mess? Eslake is not convinced: “The only way the debt stops rising in dollar terms is by running cash surpluses.” The revenue boost isn’t due to the one-off, additional $3.7 billion Victoria received in last year’s GST carve-up. Rather, it is a revision of forecast revenue from all sources calculated after that deal was done and accounted for.
“I would have hoped that, in particular, the budget would have returned to operating surplus this year, and if they weren’t going to do that, they would have pared back capital spending. There is no paring back or apparent restraint. They haven’t really started.” An hour after Pallas tabled his budget in parliament, the Reserve Bank of Australia downgraded its national growth forecasts. This is consistent with an increasingly gloomy global growth outlook held by the International Monetary Fund and the assumptions likely to underpin next week’s federal budget.
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