Commentary
Many are beginning to realize that Victoria’s economy is Trump’s house built on the foundation of printed banknotes. The question is, how long can this be denied?
According to CommSec’s October quarter State of the States report, Victoria was the nation’s second-worst-performing state, “beating” the undesired title of New South Wales.
The latest results are in stark contrast to the July quarterly edition of Commonwealth Bank’s stockbrokerage division, which said Victoria’s economy was not only healthy, but probably the “best performer” in the country. claim.
It shows how Victoria “leads the country” in economic performance, is where it should be, has a booming market and “enjoyed low interest rates… [which] Continue to support retail spending. ”
How can a major state become a state that lags behind the nation by just a quarter from leading the nation?
Victoria’s economic fundamentals have not changed. The CommSec methodology has a simple flaw.
CommSec’s quarterly report, based on indicators such as construction activity, retail spending and housing project starts, only scratches the surface of how well the economy is stimulating.
Based on these indicators, Victoria’s economy can appear ‘hot’ and ‘exciting’. However, the glow is only temporary.
Taxpayer lifting house of cards
Scratching under the surface reveals that Victoria’s economy is not as healthy as it once was.
The main fuel used to fuel Victoria’s economy is taxpayer money.
If the government is spending a lot, amassing a lot of debt, and experiencing an explosion in the cost of many projects, construction activity is plentiful, and public sector workers and government contractors have more spending power. and low unemployment makes sense. .
the study report The report, published in October by the Institute of Public Affairs, Victoria on the Edge, found that the state’s net government debt now exceeds $101 billion (US$65 billion), compared to all other states combined. It is emphasized that it is almost equivalent to Her per capita Victorian debt is currently around $15,000 (US$9,600) and is expected to double to $30,000 by 2035.
Pandemic response has accelerated the state’s economic downturn, but even before it began, key indicators of economic responsibility were already headed in the wrong direction.
Debt, spending and growing public sector worker numbers had begun to escalate even before the pandemic.
When the current government took office in 2014, Victoria had the largest surplus as a percentage of Gross State Product (GSP) of any other state in Australia. Since then it has continued to get worse.
Today that surplus has turned into the largest deficit of any state in the country.
State debt needs to be addressed urgently
At the peak of the economic impact of the Kane-Kerner-led recession in the early 1990s, the government’s net debt amounted to 16% of Victoria’s GSP.
Today, net government debt is already four percentage points higher. And it will continue to soar as the government is unable to contain the national budget deficit.
By 2030, under a scenario where interest rates rise to 5% and is consistent with market expectations, the annual interest payments on Victorian government debt would be five times the current annual payment and equal to the cost of building , will grow to more than $18 billion annually. 18 new hospitals each year.
In the 1990s, the Kennett government was able to sell public property to pay off the debt accumulated by its predecessors and to address the deficits that plagued the state budget.
Asset sales are no longer available as an option as major public assets have already been sold and the proceeds have been spent.
To make matters worse, the current Victorian government has pledged to spend billions of taxpayer dollars to re-nationalize the state’s electricity system!
One of the inescapable truths for both sides of Victorian politics is that drastic action is needed to improve the state’s dire financial situation. Victorians cannot afford a government distracted by glossy reports from big banks, barely scratching the surface of the major problems that must be overcome.
Reports such as CommSec’s State of the States are only temporary mood swings in the market and are as unpredictable as the weather in Melbourne. They do not reflect the true state of Victoria’s economic Trump, all without Ace.
Views expressed in this article are those of the author and do not necessarily reflect those of The Epoch Times.
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Kevin You is a Research Fellow at the Institute of Public Affairs. He has a background in political economy, industrial relations, and organizational studies.