The Victorian state Labor government of Premier Jacinta Allan released an annual state budget last Tuesday that featured enormous spending cuts, including thousands of public sector job cuts and $2.4 billion slashed from public schools.
Despite the austerity measures, state debt is projected to balloon to a record $194 billion in three years’ time. Even more savage cuts will be imposed in the next period, targeting workers’ wages and conditions, as well as the provision of basic social and welfare services.
International credit rating agencies, speaking on behalf of finance capital, pre-empted the state budget release with a warning that credit downgrades would be imposed in the event of insufficient budget cutbacks.
S&P Global Ratings issued a public statement via its analyst Rebecca Hrvatin: “What we will be looking for in the next budget is the state’s commitment to controlling operating costs and stabilising debt levels. We view Victoria’s commitment to controlling operating costs, making cost savings, and slowing growth in debt as important. Fiscal discipline will be key to maintaining the ratings and containing costs of the state’s large infrastructure program.”
Victoria’s credit status was previously downgraded by two notches, to AA status, in December 2020. This was during the initial stages of the COVID-19 pandemic, in which the state suffered Australia’s worst infections and most protracted lockdowns. Debt ballooned largely due to the enormous handouts to corporations coordinated by the state and federal governments. Additional credit downgrades would hike the Victorian government’s annual interest bill. Official forecasts anticipate that within three years, more than $10 billion or 9 percent of total public spending will go towards annaul interest payments.
The crisis in Victoria is not a specifically state question but rather the sharpest expression of the broader fight by the ruling elite for the imposition a sweeping austerity agenda.
Former Treasury assistant secretary David Pearl wrote in a comment for the Australian on Saturday, titled “Failing one-party state an ominous warning for nation,” that the “only real check” on the federal Labor government of Prime Minister Anthony Albanese “may be the bond market.” He stated that if the global credit rating agencies “looked more closely at our books—and in particular the wildly unrealistic spending, taxation and productivity assumptions they rely on—they would take a far harsher view.”
Since its election in 2014, the state Labor government in Victoria has functioned as a ruthless instrument of big business and finance capital. Its latest budget involves a series of anti-working-class measures.
Thousands of public sector workers will be targeted for sacking in the next months. The government has sought to cover up its agenda for as long as possible, insisting that the total number of cuts will only be revealed after an internal “review” to be finalised in June. The budget, however, tallied $3.3 billion in cuts over the forward estimates via “stripping back inefficiency” in the public sector. Treasurer Jaclyn Symes admitted the government has “flagged up to around 3,000 [jobs]” for destruction, while leaving open the possibility of even more sackings after receiving the commissioned review.
Other public sector workers, including school and healthcare workers, will be subject to further real wage cuts. The budget forecasts average annual growth in employee expenses over forward estimates of just 2.9 percent, which the government stated is “consistent with requirements of service delivery and enterprise bargaining agreements.”
This figure, which is substantially below cost of living hikes in recent years, underscores the government’s reliance on the trade union bureaucracies’ imposition of sell out industrial agreements covering public sector workers.
The government has at the same time gutted $2.4 billion from public schools, by postponing until 2031 its previous commitment to fully fund schools as determined by the School Resource Standard. This pledge was always a sham within the wider fraud that is the federal Labor government’s Better and Fairer Schools Agreement—but its withdrawal will leave the state with the worst funded schools and the lowest paid teachers and school staff in the country.
Other spending cuts unveiled in the budget include programs for environmental protection, slashed by nearly 20 percent in a year.
The Labor government, meanwhile, is proceeding with the destruction of what little remains of public housing in Victoria. It is evicting some 10,000 residents of public housing towers in Melbourne, in preparation for their destruction and replacement by mostly privately-owned apartments.
Deficits and debt would be even higher without multiple tax hikes, many of them highly regressive that hit working class families. Victoria is now the highest taxed state in Australia. Vehicle registration fees will rake in $2.4 billion next year, while taxes on pokies and electronic gaming machines will raise more than $1.4 billion.
The state Labor government faces an election next year and has desperately attempted to conceal its austerity agenda. Token spending initiatives were announced with the budget that claimed to be addressing cost-of-living pressures and supporting health and education. This included $11 billion on hospital infrastructure and other healthcare, $2 billion for early childhood education and $1.5 billion on school infrastructure. These measures amount to less than a drop in the bucket compared to what is required—yet triggered a torrent of denunciation from big business and the corporate press.
In one of multiple comments published by the Australian Financial Review, the newspaper’s Victorian political correspondent Sumeyya Ilanbey complained that recently installed treasurer Jaclyn Symes—who previously worked as a lawyer for the Australian Services Union—had “squibbed it.” She stated that Symes had “made all the right noises and sent all the right signals in the first five months she has had the job. But when she had the opportunity to embark upon much-needed budget repair, she didn’t.”
The Australian similarly issued an editorial declaring that “the spending and debt vortex in the nation’s second most populous state remains out of control.”
Underscoring the dictatorship of finance capital, Treasurer Symes is this week travelling to New York to meet with representatives of the global credit rating agencies. In the behind closed doors discussions, she will no doubt assure them that the Labor government, and its partners in the trade union apparatuses, will escalate the demanded austerity measures against the working class.
Similar discussions are no doubt occurring at the federal level. The Labor government of Prime Minister Anthony Albanese, reelected earlier this month, is tasked by the financial elites with imposing major social cuts. They are demanding an austerity offensive under conditions of a decade of forecast budget deficits, the economic instability associated with Trump’s global trade war and a rapid militarisation centreing on Australia’s involvement in US-led plans for war with China.
At the federal level and in states such as Victoria, the Labor governments are on a collision course with the working class.