‘Dictator Dan’ is long gone but his legacy remains – and Victoria’s debt mentality is in the bricks and mortar of the new Premier’s first budget, writes PETER VAN ONSELEN

Same treasurer, different prime minister – even more debt. That’s the story of the current Victorian Budget, as delivered by State Treasurer Tim Pallas.

It’s the first state budget since Dan Andrews retired as premier, making it new premier Jacinta Allan’s first since she took charge – but that’s pretty much the only thing that has changed. Increasing taxes and broken election promises are scattered throughout this budget.

While points should be awarded for effort when it comes to efforts to clean up the fiscal disaster she inherited, spending is still widespread and debt continues to rise.

That’s not exactly surprising, given that this is Pallas’s tenth budget as treasurer: he was unlikely to make a complete U-turn during the Andrews years due to his odd jobs.

That included building up debt on a scale not seen anywhere else in the country in recent years, in response to the Covid pandemic.

The new Prime Minister hopes to raise taxes and claw his way out of trouble, but the fragile Victorian economy is unlikely to bear such a burden. That said, businesses will welcome a slight reduction in payroll tax announced in the Budget.

The forward estimates of this budget show a debt burden far greater than what other states will carry in the coming years, which is one of the reasons why the Covid levy introduced in the previous budget has been extended in this one.

Former Prime Minister Dan Andrews left a budget mess for his Labor colleagues to clean up (Dan Andrews and Tim Pallas pictured)

This will cause more pain for investors in Victoria, and may be why businesses continue to leave Melbourne as property prices also slow.

Don’t be misled by the illusion of a surplus in the future. That depends on predictions that may not hold up or may not survive the cuts to election campaign promises.

Unemployment is expected to rise, and forecasts for economic growth are generous to say the least. Meanwhile, the state government’s tax revenue will rise from $39 billion this fiscal year to as much as $45 billion over three years. Property tax increases are on the rise.

The impact of the state’s debt burden won’t just be felt in Victoria, either. The ongoing Covid levy will put a hole in federal Treasurer Jim Chalmers’ numbers as he plans to present Labor’s federal budget next Tuesday.

That’s because of the Commonwealth deductions that the Victorian levy makes possible. Apparently, there have been heated discussions between state and federal treasury officials in the days leading up to this budget.

There was never going to be an easy way out of the fiscal mess Andrews left behind when he retired with his fat parliamentary pension for life.

Cutting and running might be the right term to use if the polls hadn’t shown that most Victorians wanted him behind them by the time Andrews resigned.

Yes, the ill-fated Commonwealth Games bid (and formal acceptance) cost hundreds of millions of dollars, but it is the billions of dollars in pandemic aid and shutdowns that will take the Victorian economy decades to recover from.

Its sluggishness is exacerbated by the high interest rate environment, which makes paying off so much debt even more difficult. This financial year alone, interest on the national debt will reach $6.5 billion, almost $1,000 for every Victorian national debt.

While there is an economic argument that Allan should have acted more quickly to fix this budget – which would worsen the short-term pain for Victorians with fewer benefits, but should at least limit the length of time the pain will last – she has chosen a more political path.

Victorian Treasurer Tim Pallas hands over his 10th budget and predicts record national debt (Tim Pallas photo)

New Victorian Premier Jacinta Allan oversees her first budget, hoping it will spark a political recovery for Labor (Jacinta Allan pictured)

There are cost-of-living measures, such as a $400 handout to parents in government schools. 700,000 Victorian students are eligible and their parents will receive them before the start of the 2025 school year.

Allan does not want to end her political career as a one-term miracle that was never approved by Victorians at the ballot box. Mere factional selection in the wake of the Andrews years is not the legacy she wants.

Allan wants to emulate Anna Bligh after she took over from Peter Beattie in Queensland and won a subsequent election to cement her position.

But there are legitimate questions about whether or not more spending to prolong the budget pain will help achieve this, even if new cost-of-living relief is welcomed with open arms by voters.

Is it possible that Victorians would have rewarded her for breaking the Andrews tradition of spending money the state doesn’t have?

Especially given the dire state of the Liberal Party in Victoria?

Perhaps, but a stricter budget as a political action might have come too late if it had been initiated now.

Melbourne pollster Tony Barry said: ‘Our focus groups show that Jacinta Allan needs to ensure she is not simply portrayed as Dan Andrews’ understudy. She must distinguish herself from him if she wants to win the next election. So far, voters have seen her as a blank canvas.”

Victoria has not been in a death spiral of debt since the 1980s, forcing the government to make difficult choices.

The next state election is scheduled for 2026. Although that is still over two years away, it will take time, a lot of time, to ‘fix’ the Victorian economy.

The repair work was likely to start in last year’s budget, but that was treated by Andrews as a swan song, rather than an acknowledgment of a fiscal failure that needed a proper reset.