There is an old saying that politics is like trying to solve a $100 problem with $50.
There will always be demands for funding from all sectors, whether it be health, education, disability, roads, public transport, tourism, arts, industry, sport or the many other areas that seek a piece of the pie, which in Victoria is a Budget of around $50b annually.
The task of any government of any political persuasion is to divide the pie with an allocation to each sector in an attempt to meet its needs. This is always challenging.
However what is a non-negotiable is that you have to keep the budget and debt under control. The reasons are obvious - just like a household debt, state and national debt has to be paid back.
In government, too much debt will affect your credit rating. We all hear about credit ratings, but what does this mean?
The higher the credit rating means less dollars are used to pay interest bills - leaving more funds for things like health, education and roads.
If the credit rating is downgraded, more interest is paid and there is less in the coffers. Victoria and NSW are currently the only states to have AAA credit ratings.
To highlight this, as was pointed out by the former Treasurer last year - if Victoria refinanced its debt and had Queensland’s current credit rating, it would be paying an extra $170 million a year in higher interest repayments. That is around 20 new schools per annum.
In the past four years we have seen 10 ratings downgrades of Australian states, so there’s no doubt ratings agencies are scrutinising performances of our governments heavily.
I am pleased the previous Victorian governments have been able to maintain the AAA credit rating and the immediate past government delivered surpluses in each year to pay its debt, while increasing funding in important areas like health, education, emergency services, rural roads, mental health and disability.
In the past week I have heard/read in some media, members the new government saying the former government cut funding to health and education. This is not true and to be specific here are the realities:
• Health: (Labor's last health budget in 2010/11 was $12.3b – the Coalition's last health budget in 2014-15 was $14.952 billion) - a 22% increase.
• Education: Coalition's last budget $9.2 billion - $1 billion more than Labor's last budget.
I have also heard the previous government cut CFA funding. Again not true. Labor’s 2010 CFA Budget was $391m and Coalition’s last budget was $457m and each of the past four years has been higher than Labor’s last budget.
One of the big assessment criteria for the new government (like every government in Australia) will be its ability to manage the Budget, contain debt and keep the credit rating (without excuse).
I say no excuse in relation to debt because governments always face challenges.
For example, not long into the first term of the previous government, after inheriting a $12b debt and a position where more was going out of the state’s coffers in spending than coming in in revenue - $4.1b in GST revenue was unexpectedly stripped from the State’s bottom line, which threatened the credit rating.
The reality is you have to adjust to live within your means and not let things get out of control.
Being from a rural electorate, my personal interest will be in this sound financial management being achieved while ensuring rural Victoria has the same level of investment support.
With the scrapping of the Regional Growth Fund ($500m per term) that helped deliver initiatives like our All Abilities Playground, Bairnsdale Library, Mall upgrade, Macallister Irrigation District upgrade, Bastion Point boat ramp and many more projects throughout the region worth millions, I have a level of concern over what will replace it and how much will be allocated to country Victoria.
All Governments deserve a chance to show their fiscal responsibility. Like all Victorians, East Gippslanders need this to be achieved whilst receiving our fair share of investment and support – on both counts only time will tell.
February 20, 2015