Wednesday, 29 November 2023

Victorian Auditor-General’s Office

Auditor-General’s Report on the Annual Financial Report of the State of Victoria: 2022–23

David DAVIS (Southern Metropolitan) (17:21): I want tonight to talk about the Auditor-General’s Report on the Annual Financial Report of the State of Victoria: 2022–23, tabled this day but actually available last week. It is an important report, and I pay tribute to the work that the auditor has done in this report. He makes it clear that Victoria is in significant trouble financially. He makes it clear that Victoria’s indebtedness position has deteriorated, and he makes it clear that the government has no plan – wait for that; be clear, no plan – to deal with the indebtedness. If people doubt my concern, they should look at pages 15 and 16 of this report, which look at state indebtedness – section 2.3. ‘Victoria’s debt growth has outpaced other states’ is the subheading:

Figure 2F shows GGS total net debt of all Australian states as a percentage of nominal GSP of each state. This is a common measure used across jurisdictions to understand their relative indebtedness. Victoria’s debt to GSP ratio was comparable to other states prior to the pandemic.

This chart runs from 2012–13 through to the projections into 2026–27. What is clear is that from a take-off point in about 2016–17, and accelerating from 2018–19 and then going further beyond that, Victoria’s position of net debt grew worse and worse relative to other states. We know in fact that by 2026–27 Victoria’s debt position – our aggregate net debt – will be greater than New South Wales, Queensland and Tasmania combined. Again, I pay tribute to the work that the auditor has done in making this a very clear position. The gross debt as a percentage of gross state product will be at 30.3 ‍per cent in 2026–27, for those who wish to look at figure 2G:

The state Budget –

he says –

is focused on GGS debt as it relates to financial sustainability. The government assesses the sustainability of the debt by applying the following financial measures:

• net debt to GSP

• interest expense to revenue.

We also consider appropriate measures to be:

• gross debt to GSP

• gross debt to revenue (indebtedness) – gross debt as a proportion of operating revenue

• interest expense relative to the portfolio of debt – considering new and refinanced (rolled over) debt and the maturity profile.

The impact of rising debt on these debt sustainability measures are discussed further in … Section 2.4.

As I say, this is a very important report. It is a report that Victorians should in fact be reading. He goes further later in the paper. He talks about emerging risks with employee cost growth. It is very clear – not only interest expenses are growing but employee expenses are also growing as a proportion of operating expenses. It goes through this in great detail. The number in the Victorian public sector is growing faster than the population, and paradoxically the quality of services is falling. We know that waiting lists have got greater. We know that dental waiting lists are worse. We know that of a whole series of areas. We have heard ambulance stories in the chamber in the recent period. I could go on.

Basic services that Victorians expect are not up to scratch despite the greater spending and despite the greater debt. Much of this debt also – and I want to be quite clear, and the graphs in here make it clear ‍– relates to the period before COVID. We know the government made these decisions deliberately. There was an announcement, as some will remember, in the week before the 2018 election where Daniel Andrews, then Premier, and Treasurer Tim Pallas announced they were going to increase the debt share from 6 to 12 per cent of GSP – a deliberate decision, and they were going to go for it and jack up debt. And they went further than that. They obviously went much, much further than that, and it has got worse and worse and worse. Of course COVID was part of it, but much of the debt is BC – before COVID. Let us face it, every other state had COVID too but our debt, the debt we are carrying now, is much worse. And the auditor has done a good job in drawing the community’s attention to these matters.