Doubling Victoria’s debt to $55 billion is a responsible way forward despite a housing market downturn, Premier Daniel Andrews says.
A day after the state budget was delivered, Mr Andrews has defended a planned massive increase to Victoria’s debt over the next four years.
“We are delivering on our commitment to borrow to build the infrastructure that we need,” he told ABC radio on Tuesday.
“The alternative would be to not build these things.”
Mr Andrews likened the suggestion the state should not go into to debt to telling people “don’t buy your house until you can pay cash”.
“Borrowing money when borrowing costs are very low, borrowing at a responsible level is exactly the right thing to do,” he added.
The premier pointed to a $1 billion surplus for the 2019/20 outlook, concurrent to a $5.2 billion property stamp duty write down and acknowledgement from ratings agencies that projected spending is within the state’s means.
Ratings agency Moody’s said Victoria’s growing debt was manageable within its triple-A credit rating. But S&P Global Ratings said the property downturn will put pressure on the state’s operating margins and new taxes will only partly offset the gap, adding that wrangling increasing public sector employee costs will be a challenge.
Like the other states, the Victorian budget is over-exposed to downturns in property transfer taxes, the Australian Industry Group warned.
“There is a need to develop an approach to make the state’s revenue more sustainable and less in need of calling on ad hoc revenue sources,” AI Victoria chief Tim Piper said.
Opposition Leader Michael O’Brien has attacked the government for not being frugal enough during a downturn and pointed to the ratings agencies noting the lack of headroom in the budget.
“Daniel Andrews and (Treasurer) Tim Pallas have put way too much reliance on debt and way too much reliance on the property market roaring back, because if that doesn’t happen we are all in deep trouble here in Victoria,” Mr O’Brien said.
The opposition called for a ceiling on state debt and a tighter rein on project budgets, with the cost of several infrastructure builds blowing out.