THE Baillieu government has been told to slash spending further and rein in state debt or risk
losing Victoria's coveted top credit rating
It said the state had ended last financial year with
a deficit equivalent to 4.9 per cent of total revenue - almost twice as large as expected
- and predicted
things would to continue to deteriorate this year
as the government spends money delivering its law and order agenda and other election commitments.
The agency said
a failure to rein in debt
, combined with
''still elevated levels of spending'', could jeopardise the top credit rating.
A reduced credit rating would expose the state to
higher costs of borrowing on international markets.
''Lack of government resolve to implement budgetary redress measures sufficient to bring the budget back to balance and constrain
debt accumulation could result in a downward pressure on the rating
,'' the agency said.
In an effort to keep its measure of the budget in surplus, the state government also announced
plans to lift motor vehicle stamp duties and registration charges, and to take almost $500 million from WorkCover
.
But Moody's warned progress could be further hampered by ''pressure to improve services'' and pressure to resolve
a series of wage disputes with nurses, teachers and public servants
.
''The state will also need to manage a more volatile and less robust revenue environment, particularly with respect to property-related conveyancing duties and GST-backed Commonwealth grants,'' it said.
State Treasury's budget update, released late last year, predicted net debt would double from $11 billion last year to $22 billion in 2015.
Treasurer Kim Wells has received the final version of the long-awaited review of state finances, headed by former Treasury chief Mike Vertigan.
A previous draft report said the state would have to borrow to pay public servants' wages unless it dramatically cut spending in the budget
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