Victoria has ‘no choice’ but to confront growing debt problem

Paul Bassat offers a striking way to think about Victoria’s debt. The well-connected, quietly spoken venture capitalist has calculated that every baby born in this state today will come into the world owing about $24,000.

This is the share of a growing, public financial burden each of us are carrying into what Bassat calls a “disproportionately important” state election where debt should be the defining issue – if our political leaders are willing to meet the seriousness of this moment.

“There is a disconnect between what has been a pretty conventional campaign and the reality of the fiscal position of the state,” the Seek founder and former chief executive tells The Age.

“Victorians are saying we actually care about debt and spending. We’re up for an honest conversation. I don’t know if there has been a time in any state or federal election when debt and government spending was nominated by voters as the number one issue.

“Victorians are saying ‘please tell us your plan, please let us know where you are going to have to make some hard decisions, because we know hard decisions need to be made’.”

As evidence, Bassat cites the results of this week’s Resolve Political Monitor published by this masthead and separate research commissioned by AMPLIFY, an advocacy group he chairs, showing that economic and fiscal management issues are the top priority of voters ahead of the November 28 election and that overwhelmingly, people want the next government to have a plan to tackle debt.

It is also at the top of The Age’s list of issues to question Premier Ben Carroll and Opposition Leader Jess Wilson on when they appear at next week’s Melbourne Assembly co-hosted by this masthead.

Victoria’s Financial Report, the state’s consolidated accounts for the last financial year tabled in parliament on Thursday, shows that as of June 30, net debt was $160.6 billion. This is a $4.7 billion improvement on the figure forecast in last year’s state budget, due to higher than expected GST receipts, extra funds from the Commonwealth for Airport Rail and decisions by the Allan government to delay other projects.

Wilson said the report showed Victoria’s finances still deteriorating. “Despite a $2 billion bailout from the Commonwealth government and higher revenue due to inflation, net debt and interest repayments continue to climb,” she said.

According to the current state budget, Victoria’s debt is forecast to reach $200 billion by the end of the next term of government. By that stage, unless Victoria’s significantly changes its fiscal track, the forecast annual interest expense of $11.8 billion will soak up 23 cents of every dollar raised by state taxes.

Bassat warns that given the worsening global economic conditions and rising interest rates, this may be an optimistic assumption.

He says there is an urgent need to address in this election campaign what he describes as Victoria’s “unsustainable level of debt” and urges both Labor and the Coalition to commit to returning the state’s finances to a cash surplus – more money coming in than going out on recurrent and capital expenditure – within the life of the next parliament.”

This is the fiscal precondition to retiring debt.

“I just don’t think there’s a choice,” he says. “We’re currently running cumulative cash deficits in the forward estimates period of another $32 billion. I just don’t see how that’s sustainable. You can’t say we’re going to start taking steps in four years’ time.

“I think it is a reasonable expectation that, at the end of the next parliamentary term, Victoria should be running cash surpluses.”

Over the next few weeks, AMPLIFY will campaign from the sidelines of the Victorian election about the economic and social consequences of the state’s current debt trajectory, the growing cost to the state budget of servicing it and the need for all parties to commit to credible plans to reduce debt without increasing taxes.

Bassat sat down at length with The Age to outline the purpose of the campaign, his reasons for leading it and what he hopes to hear from Carroll and Wilson at what he considers a critical juncture for the state. Although he has previously donated to Labor and the Coalition in previous state and federal campaigns, this is his first direct intervention in an election.

AMPLIFY describes itself as independent and non-partisan and has a governing board that bridges the traditional party divide. Its broad policy proscription for Victoria calls for reduced government spending, more efficient provision of services and better use of technological innovations.

Wilson shortly after becoming opposition leader in November 2025 called for the establishment of a bipartisan “commission of fiscal responsibility” to address Victoria’s debt crisis. In her economic plan released in May, she promised to return the budget to a cash surplus by 2032.

To achieve this, she is banking a long-term hiring freeze on back-of-house public servants to reduce the state’s wages bill, which according to Thursday’s Financial Report topped $40 billion in 2025-26. She has also promised to cut land tax and payroll tax and scrap the unpopular Emergency Services and Volunteer Fund.

Carroll since becoming premier in July has identified $1 billion in savings from the design of the $34.5 billion Suburban Rail Loop, initiated a technical review to shave off another $1 billion, and also pledged to reduce land tax.

Carroll has so far set no target to return the budget to a cash surplus and is campaigning against the Coalition’s promise to do so, warning that it would require $40 billion of undeclared cuts to services. “I do believe in paying down debt,” he said on Thursday. “I do believe we need to do it though, in a sustainable, responsible way to every Victorian that we don’t hurt frontline services.”

The Andrews and Allan governments believed that a combination of higher taxes and government spending to create jobs could “grow” the state out of debt. Their fiscal strategy aimed to reduce debt as a proportion of the state’s economy but had no policy to pay down debt.

The S&P Global ratings agency, when it last assessed Victoria’s fiscal situation in July, said the state’s outlook was stable but warned of the need for spending discipline. “Any additional spending announcements could weaken our expectation of Victoria’s fiscal trajectory, including unbudgeted election commitments and upcoming wage agreements,” it noted.

Bassat believes the greater public focus on state debt in Victoria is driven, in part, by the difficult decisions being made by many families as they confront persistently high inflation and rising interest rates. “If families are expected to bring that attitude and mindset, then why isn’t the same expectation on the government,” he says.

Voters also understand that, as the interest rates they are charged to service their mortgages go up, so does the cost to government of refinancing debt. “Not only is debt going up but the interest rate that’s applying to the debt is going up. That is a real problem. Does that mean there is not going to be the investment in education we have come to expect, the investment in public transport and roads, the investment in healthcare?

“I think people are drawing a clear nexus between their personal situation and the government’s debt.”

AMPLIFY was established in 2023 as a national advocacy group and so far, has focused on issues relating to housing costs and supply and the falling living standards facing young Australians. Its board includes former Queensland Labor minister Kate Jones, former NSW Liberal prime minister Dominic Perrottet, former AFL chief Gillon McLachlan and along with Bassat, prominent business figures.

Bassat says that debt, like prohibitively expensive housing, is a form of intergenerational equality.

He says the first thing that Victoria needs is a commission of audit to provide a full, unvarnished picture of the state’s finances. From there, everything should be up for discussion – how and what we spend on services, the scale and tempo of the state’s capital works program, assets that can be monetised – to start paying down debt.

In Victoria, this carries echoes of the early days of the Kennett government nearly 35 years ago, when public finance guru Bob Officer was called in to independently run a ruler over the state’s books. It also raises, in the middle of an election campaign, the politically unpalatable issue of spending cuts in big budget areas like health, education and transport.

Bassat is convinced that enough Victorians are ready to have this conversation.

“The starting point is that these things are really important to the community. But does Victoria have the luxury of being one of the highest spending states in most areas of services?

“It’s not about trying to convince the community. It’s about trying to convince political leaders how much the community cares and why it’s so important.”

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