The joint announcement last week by the Victorian and Commonwealth governments of a business support package was welcome. It defied much recent discussion suggesting, unfairly, that collaboration between the two governments was not achievable, despite the many challenges that will always exist between the two levels of government.
It was good to see, especially joint statements from the Prime Minister, premier and both treasurers. And, although support grants are no substitute for businesses being able to operate freely, they will genuinely assist eligible firms and individuals who can access the funds being offered.
Empty shops in Melbourne’s inner-city.Credit:Justin McManus
But as we pass through each painful lockdown and navigate our way through the twists and turns of the pandemic, the need for more regular budget reporting from governments and, in our case, the Victorian government becomes more acute.
Given how quickly developments and events can shift the foundations of already precarious forecasts in both the annual Victorian budget and mid-year economic update, due by 15 December every year, there’s a strong case for the government publishing quarterly economic updates.
In the current environment, the gap between they May budget and December update is far too long.
This is not to say that in Victoria, Treasury doesn’t already publish a good deal of information throughout the year. Victoria’s Financial Management Act already imposes a range of requirements to publish audited and quarterly financial reports.
Premier Daniel Andrews and Treasurer Tim Pallas unveil plans to lift Victoria’s net debt levels by 250 per cent in last week’s budget.Credit:Getty
But the depth of the material published varies depending on the data being released and, apart from the December update, cannot fairly be characterised as economic updates.
To be fair, it could be argued that this imposes additional work on Treasury. Conversely, the current arrangements, at least during the pandemic we face, are leaving data on outlays, revenue and forecasts in place when they are likely to be seriously inaccurate within weeks of their publication.
So, the question becomes: do we want the budget papers to be seriously out of date for a period of six months or three months?
If we take the Victorian budget delivered in November 2020, and compare it with the Government’s May budget earlier this year, as Victoria’s Parliamentary Budget Office (PBO) has done, the changes in forecasts are readily apparent.
Between November 2020 and May 2021, the Victorian Government revised its forecasts for real GSP growth up by 2 percentage points in 2020–21 and down by 1.25 percentage points in 2021–22. In budget terms, these are significant variations.
In the same period, the PBO reports that the government revised its 2021–22 net operating balance forecast upwards by $1.5 billion while also revising its net operating balance forecast up for 2022–23 and 2023–24. Although it forecasts a net operating deficit over this period, it’s hard to see how Victoria’s two lockdowns in June and July could not have seriously affected these forecasts.
A similar story can be told around net debt to gross state product, population forecasts and tax revenue (putting aside the legitimate criticisms of the new and higher taxes which the Government announced in May).
I’m not suggesting that the Victorian government, or any other government, can be blamed for changes in forecasts due to pandemic management and related events.
Rather, more regular budget updates, even if in a more informal manner, is in the public interest.
Is it ideal to have to wait until mid-December to see what impacts lockdowns and vital support packages are having on the state of Victoria’s books?
There is one other matter worth putting into perspective at this point. Just bear in mind that the May budget did not account for the full debt impact of the suburban rail loop project.
The Government did include $2.2 billion for early works on the project, but everybody knows that the $50 billion price tag is nowhere near the accurate cost of this project. The industry rule of thumb for tunnelling suggests that you book at least $1 billion for every kilometre. On that basis alone, SRL cannot cost anywhere south of $100 billion. When the full impact of that project on the Victorian budget is revealed, whenever that may be, that will have an enormous impact on the State’s debt profile.
The problem isn’t spending on public transport which we all need and ought to support. It’s having a detailed and credible business case that justifies so much public money going to one single project at the expense of other vital projects such as hospitals, schools, public transport and courts among others.
The various support packages to individuals and businesses affected by lockdowns are plainly in the public interest. There is nothing inconsistent with that objective and requiring more regular budget updates to see how we are tracking as a state and how the government plans to ease Victoria out of lockdowns in the strongest possible shape over the coming weeks and months.
John Pesutto is a Senior Fellow at the School of Government at Melbourne University and was Victoria’s Shadow Attorney General from 2014 to 2018.
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