Vic budget deficit blows out to $23.3bn

Tiffanie Turnbull
·3-min read

The coronavirus pandemic and Victoria's 112-day lockdown has decimated the state's coffers, with Treasurer Tim Pallas to outline a $23.3 billion deficit and more than $150 billion in net debt in Tuesday's budget.

But it is not all bad news, with the budget also expected to include tax cuts and incentives to lure global companies to the state, as well as already-announced boosts for mental health and social housing.

Details obtained by AAP show the Andrews government will undertake record borrowing which will grow net debt to $86 billion in 2020/21 before reaching $154 billion by 2023/24.

The state was already borrowing billions for major infrastructure projects before the pandemic hit.

Victoria's revenue base collapsed by about 10 per cent during the crisis, Mr Pallas says, and with interest rates at record lows, increased borrowing is the best way to revive the economy.

"I don't think I've ever been accused of being an optimist... (but) Victoria is bouncing back and there is great cause for optimism, even for me," he told reporters.

"This is a budget that puts the Victorian people first with the support they need to recover and rebuild."

With economic output plummeting and unemployment skyrocketing as a result of the pandemic, much of the money borrowed will be spent on job-boosting infrastructure projects and social and business supports.

The government's infrastructure spend is forecast to average $19.6 billion each year over the forward estimates.

The government has already spent $13 billion to combat the coronavirus crisis, with funds allocated to the health system and direct economic support to help businesses survive and rebuild.

Some money will return to the coffers through a new distance-based levy for drivers of zero and low-emission light vehicles, to offset losses in fuel excise.

Electric cars will pay 2.5 cents per kilometre, while drivers of low-emission cars will be charged two.

It will cost the average driver between $260 and $300 each year, Mr Pallas said.

He rejected the idea the new levy would discourage the take-up of electric vehicles.

"Even after the introduction of this charge for usage of our road network, people driving electric vehicles will pay between 40 and 45 per cent less than motorists driving in a car fuelled by petrol or diesel," he said.

More than $45 million is set aside in the budget to accelerate the adoption of the vehicles.

While this budget will be $23.3 billion in the red, deficits are projected to reduce over the forward estimates to $13.1 billion in 2021/22, then $6.7 billion in 2022/23.

Opposition Leader Michael O'Brien says the figures are "eye-watering".

"Under these figures Victorians will see an extra $20,000 in debt for every man, woman and child," he told reporters on Saturday.

"That debt all has to be paid back at some point."

But Mr Pallas says Victoria is not alone in racking up a significant deficit, with no jurisdiction immune to the ruin caused by the pandemic.

"It is important tpeople appreciate that we will be reducing those deficit numbers by about 75 per cent over (the forward estimates)," he said.

The federal government has forecast an operating deficit of $213 billion, while the NSW government has predicted a $16 billion deficit.