Victoria’s treasurer says it’s time to forget about surpluses, as the state recorded a $6.5 billion deficit for the last financial year due to the coronavirus pandemic.
The government’s 2019/20 financial report, tabled in parliament on Thursday, shows the state fared much worse than initially forecast.
“We were on track to deliver our sixth-straight surplus and that track, of course, was ultimately derailed as a consequence of the onset of the bushfires and coronavirus,” Treasurer Tim Pallas told reporters.
According to the report, net debt increased by $18.8 billion to $44 billion in the 12 months to June 30, as the government spent billions to both prepare for the pandemic and then to cushion the blow to the economy.
The state’s unemployment rate hit a two-year high of 7.5 per cent, with 168,400 people losing work between March and June.
Population growth has also slowed from 2.2 per cent in the year to March to 1.8 per cent at the end of the financial year.
Meanwhile, tax revenue was down $1.2 billion to $23.2 billion, in part due to the closures of Crown Casino, hotels and clubs depriving the state of gambling taxes.
Victoria’s GST revenue from the Commonwealth was also down $1.7 billion.
Metropolitan Melbourne has spent more than three months under the nation’s toughest lockdown and restrictions aren’t expected to be eased as quickly as planned due to a number of concerning outbreaks.
Mr Pallas said he wasn’t going to “sugar coat” the problems the state faces.
“I suspect we’re not yet at the worst of the economic event I think we’ve still got a month or two to go,” he said.
While the treasurer would not reveal what day he plans to hand down his 2020/21 budget in November, he said the state would play a “substantial intervention role” to bring the economy back to life.
We do have to find ways to make sure that we get people back into employment and those are the sort of investments you’ll be seeing.
“And yes, you’ll be seeing for some time, deficit and debt, increasing as a consequence of that.”
Mr Pallas said even the federal government had favoured a Keynesian-style spending program when it handed down its budget earlier this month, with its net debt expected to hit more than a trillion dollars by 2023/24.
“We need not to pursue surplus, we need not to be so obsessed about debt that we fail to remember our principal obligation is to the wellbeing of Victorians and to use our balance sheet to protect them,” Mr Pallas said.
Shadow treasurer Louise Staley said the state’s budget was already in deficit prior to the bushfires and the pandemic.
“We’re here because of Labor’s financial mismanagement, they can’t manage projects. Every project blows out and the treasurer has completely absented himself from the field of financial oversight,” she said.
She said it was imperative the state ends its tough lockdown so businesses can reopen and people can return to work.