News about the Victorian Budget released yesterday:
https://www.afr.com/politics/victorian-debt-to-hit-188b-as-labor-budget-shirks-c...Ratings warning over Victoria’s $188b debt.
Rating agencies have put the Victorian government on notice after it revealed state debt would climb to $188 billion in a budget which paused the Melbourne Airport Rail project and delivered $400 handouts for families, but failed to drastically cut spending.
Premier Jacinta Allan is counting on a growing economy and an interest rate cut later this year, which Treasurer Tim Pallas said he “fully expects to see”, to curb the state’s
$26 million-a-day interest bill.The budget came on the same day the Reserve Bank warned rates would stay higher for longer because of sticky inflation. Mr Pallas delivered a $15.2 billion deficit on Tuesday, with net debt growing from $156 billion next year to $188 billion by 2028, but forecast an operating surplus of $1.5 billion by 2025-26.
S&P Global Ratings analyst Anthony Walker said Victoria, which was downgraded two notches in 2020 from
AAA to AA to become the worst rated state in Australia, could face another downgrade to AA- if state debt reached 240 per cent of operating revenues, or interest payments reached 10 per cent of those revenues.
S&P analysis previously warned Victoria carried a greater debt burden than 10 similar sub-sovereign states in Canada and Germany.
“We expect Victoria’s gross debt as a proportion of revenues to soar past 200 per cent of operating revenues,” Mr Walker said. “This is the highest among the Australian states and stems from successive operating deficits and its large capex since the pandemic hit in late fiscal 2020.
“Debt to operating revenues has almost tripled since this time. Victoria’s serviceability costs are also rising.”
Tuesday’s budget had no new taxes or levies for the first time in several years, although waste and fire levies will increase.
The Property Council of Australia slammed the government for “the complete absence of budget measures to alleviate the tax burden” to get more apartments and townhouses built. Residential landowners are already bracing for the extension of the Vacant Residential Land Tax, which will apply to all “vacant” properties from next year.
“Government’s revenue from state taxes is set to continue its steady upward trajectory, with total tax revenue expected to increase by more than $8 billion over the next five years, which represents a 22 per cent increase,” said Craig Whatman, tax partner at Pitcher Partners.
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