Australia and the World Past and Present

Victoria’s public debt has fluctuated dramatically across the premierships of the last four decades and reflect the political priorities of the time. From the debt of John Cain Jr’s government in the early 1980s to the much larger liabilities of the contemporary era, debt has remained a central issue in Victorian politics.

When John Cain Jr became Premier in 1982, Victoria’s debt was estimated at around $1–2 billion. By the time he left office in 1990, Victorian debt had climbed to approximately $11–12 billion. The state’s finances were under severe strain and there were mounting problems within government-associated financial institutions.

Joan Kirner inherited this worsening fiscal environment when she became Premier in 1990. During her short premiership, Victoria’s financial crisis deepened. The State Bank of Victoria’s merchant banking arm, Tricontinental, collapsed. By the time Kirner left office after the 1992 election, Victoria’s debt had expanded to somewhere between $23 and $33 billion, depending on the accounting measure used. The debt crisis became one of the defining political issues of the period and contributed heavily to Labor’s defeat.

Jeff Kennett entered office in 1992 with a mandate to repair Victoria’s finances. His government undertook one of the most far-reaching programs of fiscal restructuring in Australian state history. Spending cuts, public sector reforms, downsizing of government services and major privatisations formed the centrepiece of the strategy. When Kennett left office in 1999, Victoria’s net debt had been reduced dramatically with some measures showing debt cut to only a few billion dollars and others indicating it had been virtually eliminated. The Kennett years fundamentally reshaped the state’s financial management approach.

Steve Bracks succeeded Kennett in 1999. The Bracks administration largely maintained a conservative financial stance. Economic growth, steady revenues and controlled spending enabled Victoria to preserve relatively low debt levels.

John Brumby took over in 2007. Debt began rising again under Brumby’s leadership. By the time he left office in 2010, Victoria’s debt had grown to an estimated $12–18 billion.

Ted Baillieu’s Coalition government inherited this renewed borrowing trend in 2010. Baillieu emphasised fiscal restraint but also maintained commitments to infrastructure spending. Debt continued to increase during his premiership, reaching approximately $22–24 billion by the time he resigned in 2013.

His successor, Denis Napthine, remained in office for only a short period. Debt levels during the Napthine government remained broadly similar, ending somewhere in the vicinity of $22–27 billion when Labor returned to power in 2014.

Daniel Andrews became Premier in 2014 and presided over one of the most consequential shifts in Victoria’s fiscal history. His government embarked on a program of major infrastructure projects. Borrowing increased substantially to fund these initiatives. The situation changed even more dramatically during the COVID-19 pandemic. Emergency health spending and the economic disruption associated with lockdowns were significant. By the time Andrews resigned in 2023, Victoria’s projected net debt had risen into the range of approximately $135–170 billion, depending on the budget forecast and debt measure used.

Jacinta Allan inherited this fiscal landscape when she became Premier in 2023. Of course Allan had been part of Andrew’s government and one of the most senior ministers. Victoria’s projected debt trajectory has continued upward on her watch. Contemporary forecasts have placed debt at around or above $190 billion in coming years.

Victoria’s debt story illustrates how state finances are shaped by political choices. Debt rose sharply during the financial turmoil of the Cain–Kirner era, was aggressively reduced under Kennett, remained relatively subdued under Bracks, then gradually increased again under later governments before surging during the Andrews period.

The chickens have now come home to roost.

The level of debt that Victoria now carries limits the government’s capacity to properly fund essential areas such as health and education.

The debt of the Andrews/Allan era will be multi-generational debt. It will be a yoke around the necks of current and future generations and will erode their standard of living and opportunities.