A mid-year financial update, released on Monday before the government entered caretaker mode, shows Victoria is set to post a deficit of $9.68billion for 2022/23.
That’s up from the $7.86 billion estimate given in the May state budget.
“Risks to Victoria’s outlook are elevated and include uncertainty over the domestic and global inflation outlook, interest rates, geopolitical conditions, recent flooding and the continued impacts of the COVID-19 pandemic. “, did he declare.
However, Victoria’s total net debt as of mid-2026 has been revised down to $115.6 billion from $118.5 billion.
Treasurer Tim Pallas said the improvement in the debt position was largely attributable to the government’s VicRoads joint venture, which brought in the state $7.9 billion.
“We did better than expected on this transaction,” he told reporters.
“We hadn’t provisioned that much and that’s effectively the difference between those debt numbers.”
The money was placed in a future fund to help pay off Victoria’s growing debt and does not count against operating profit for that year.
“It’s basically a capital injection,” he said.
The state remains on track to return to a marginal surplus of $894 million by 2025/26, the same year net debt was expected to hit $167.5 billion in May.
But the budget update lowers that figure to $165.4 billion as Victoria claws back millions more in cash from tax revenue in years to come.
That’s despite Victoria’s interest payments set to climb to $7.3 billion by 2025/26.
On the budget and forecast estimates, interest charges should represent an average of 6.4% of total government revenue.
The government has decided to lock in a ‘large proportion’ of existing debt in the form of long-term fixed rate bonds to reduce exposure to interest rate fluctuations and believes it can compensate with 12 billion of additional revenue expected over the next four years.
“There is more than enough capacity to deal with it,” Pallas said.
But the floods unfolding in the state are confusing the fiscal cards.
The budget update notes that the October floods damaged properties, assets and community properties, disrupted businesses, displaced homeowners and added existing pressure on fresh food prices.
But the extent of the damage is not yet known and it is too early to determine its impact on economic growth.
“There could be some downward pressure on projected economic growth in the December quarter and then some upward pressure in the March quarter during the recovery phase,” he said.
Opposition Leader Matthew Guy said he was not surprised by the rising deficit, saying the Andrews government was on track to rack up the highest level of debt in Australian history .
“It’s financial vandalism and that’s why we have debt ceiling policies in place,” he said.