Dave Richardson

The Australian Financial Review has had another go at the Victorian Government this time based on a report of the Victorian  Auditor General’s Office (VAGO). The Fin turns a fairly deadpan treatment into emotive language such as the “Victorian Labor government has blown a $50.6 billion hole in the state’s finances over the past six years”.

Notice that 6 years includes the COVID period when deficits skyrocketed at all levels of government; Commonwealth, state and local.

If you keep reading you will eventually find that there was an operating cash surplus of $3.2 billion in 2024-25. The $50.6 billion hole was based on a non-cash definition of the budget balance. Without going into the technicalities note that we usually talk about the federal budget on a cash basis. Cash accounting is simply the difference in money coming in versus money going out – that’s the same accounting as you use when you follow your weekly bank balance. It makes sense at the state level as well.

But all that is looking in the rear vision mirror.

The Victorian budget papers look forward and show net operating cash flows of $6.2 billion in 2025-26 and $26.5 billion over the forward estimates. The Fin does not look at that.

The Fin’s story didn’t get past the introductory parts of the VAGO report so there was no mention of the even bigger cash deficits when you take into account Victoria’s investment in infrastructure, dwellings, roads, rail, bridges and the rest.

But, and this is the interesting thing, if you look at the Victorian Government’s total assets you find net worth has increased and is expected to increase by another $29.5 billion from $170.8 billion to $200.3 billion over the period to June 2029. That will be a net worth of around $28,000 for every man, woman and child in Victoria by 2029. 

Even during the worst of COVID, the Victorian net worth continued to grow.

As you rummage through the budget accounts and the VAGO contribution it is hard to appreciate what is really going on. Hidden behind the cold numbers are the benefits Victorians get through their various health, education and other services as well as the infrastructure. This is not to say everything is perfect, the states are crying out for more capital spending. Think of potholes, traffic congestion, crowded public transport, the need for more health facilities, schools, public housing etc. These shortages need addressing yet those at the Fin are hung up on debt, deficits and keeping taxes low. We should instead by focused on unleashing the full potential of the states.