vic_logo
budget.vic.gov.au

Fiscal strategy

In Labor’s Financial Statement 2018, the Government committed to stabilising net debt at 12% of GSP over the medium term to deliver three major infrastructure projects – North East Link, Melbourne Airport Rail, and 25 additional level crossing removals.

Waitress-in-small-cafe

The impact of the economic downturn on the State’s revenue base, in addition to critical efforts to respond to and recover from the pandemic, means net debt to GSP will increase by around 19 percentage points over the budget and forward estimates.

While borrowings will continue to grow until revenues and expenses better align, borrowing costs are at historically low rates and expected to be lower than the economic growth rate.

Low interest rates mean the increase in borrowings can be managed without significantly increasing the proportion of the Budget spent on interest payments. Interest expense as a share of total revenue remains manageable.

In short, now is the time to borrow in order to rebuild.

These investments will help drive Victoria’s recovery from the global pandemic, helping to get more Victorians back in work and giving more families confidence about their future.

The Government remains committed to sound fiscal management. In the medium term, this requires the realignment of revenues and expenditure, coupled with a strategy to fund the Government’s infrastructure program.

The timing of this must be balanced against the Government’s important role in supporting the economic recovery.

The Government’s medium-term plan involves four steps:

  • Step 1: creating jobs, reducing unemployment and restoring economic growth
  • Step 2: returning to an operating cash surplus
  • Step 3: returning to operating surpluses
  • Step 4: stabilising debt levels

The Government is committed to ensuring expenditure is targeted to key priority areas in order to deliver the greatest possible economic and social benefits for Victorians.

Reviewed 23 November 2020

Was this page helpful?