The Rust Bucket State
The undeniable truth is that Victoria is moving closer to once again being labelled the ‘rust bucket state’- a position reminiscent of the early 1990s. By James Mathias.
It was the early 90’s under the Kirner Labor Government that Victoria was labelled the ‘rust bucket state’.
The term represented the Victorian plight; significant budget deficits, billions in debt, a bloated public service and a hollowed-out manufacturing sector. It was December of 1992 when new Premier Jeff Kennett inherited a 12 per cent unemployment rate well above the national rate especially compared with NSW.
Each day, under this current Premier, the undeniable truth is that Victoria moves closer to once again being labelled the ‘rust bucket state’ a position reminiscent of the early 90’s.
The second round of Victorian lockdowns caused by the avoidable mismanagement of COVID-19 outbreaks all but confirm that any economic recovery Australia sees in the next two quarters will be without any input from Victoria.
Unemployment in Victoria has been increasing since November last year. Victoria had already broken through an unemployment figure higher than 5 per cent in January whereas in NSW the figures only went past 5 per cent in April.
The precarious nature of the state’s budget further imbeds a position of weakness to deal with any future shocks. The significance of the current $800 million budget deficit is exacerbated by the weak revenue base upon which it stands.
The Andrews Government in 2018-19 made 7 times more revenue from fines than royalties. By 2022-23 fine revenue is expected to grow by almost $200 million to $960 million whereas growth in royalties will increased by just $17 million.
Given the mining and exploration sectors are the beacons of hope within the national economy as they continue to maintain record production and employment, Victoria all but misses out on any income or reward from its continued strength.
One of the only areas of employment growth in Victoria has been to the Public Service which over the last 4 years has added some 46,000 additional workers to its payroll. The bill for all these additional workers has grown from $19 to 26.6 billion per year. An increase of 40 per cent. The public service wage bill is the largest expense of the Andrews Government.
In 1992, Kennett was faced with a $2.2 billion budget deficit and Government debt of $33 billion. The Andrews Government budget papers confirm that debt is expected to reach $49.3 billion this year which was forecast before a further $24.5 billion was borrowed by the Government in April for COVD-19 measures.
With the further lock-down in Victoria costing the state economy an extra $1 to $2.5 billion a week according to IFM Investors chief economist Alex Joiner, questions about the intensity of the Victorian government’s response must be asked.
The mortality rate has been far lower than the forecasted, even despite this recent outbreak in Victoria. For example, the death toll in Victoria from COVID-19 stands at 49 at 24 July. Each death is tragic, however if the death rate from COVID-19 in the UK had applied in Victoria, more that 4,200 would have lost their lives.
Daniel Andrews needs to be more definitive about the intended goal of further lockdowns relative to the associated costs given that total eradication is unrealistic. The harsh reality is that the cost of pursuing such an absolute protection-first strategy is at the loss of more jobs, the collapse of more businesses and the further curtailment of liberties and lifestyles.
Already, pre-COVID-19, Victoria was well on its way towards being once again the ‘rust bucket state’. The unstable economy built on public sector growth and unsustainable budget revenue was always going to come off second best to the shock of COVID-19 and the first round of lockdowns. The second round could prove to be devastating for years to come.