Each year, the Auditor‑General releases a report assessing Victoria’s consolidated financial statements.
The Victorian Auditor‑General’s Report on the Annual Financial Report of the State of Victoria 2024–25 has been released amid the state facing record debt levels, the threat of further credit rating downgrades, ongoing industrial disputes (e.g., teachers and health workers), and scrutiny over the management of mega‑projects.
This year’s report findings reinforce concerns about fiscal sustainability and transparency, even though the accounts themselves are technically sound.
In particular, the state’s finances remain under significant pressure, with large infrastructure cost overruns, rising debt, and persistent budget deficits.
The Auditor‑General warns that debt, deficits, and infrastructure blowouts pose serious long‑term risks to the state’s financial sustainability.
The key themes from the Victorian Auditor‑General’s assessment are summarised below.
Financial Position:
The Victorian Auditor‑General notes that state debt has increased significantly, reflecting ongoing borrowing to fund major infrastructure projects.
The state’s operating deficit widened, driven by higher interest costs, public sector wages, and overruns in transport and health projects.
Victoria’s liabilities now exceed $150 billion, with debt servicing costs becoming a major budget challenge.
I will add that should the major credir ratings agencies follow through with their threats to lower the state’s credit rating, then the interest rate paid on state debt and ergo interest payments will rise.
Infrastructure Cost Blowouts:
This year, the Victorian Auditor General identified $11.66 billion in cost overruns in 2024 alone, consistent with previous years blowouts (i.e., over $11 billion annually since 2022).
Projects such as the North East Link, Suburban Rail Loop, and hospital redevelopments are cited as major contributors.
Weaknesses in project planning, risk management, and transparency continue to drive these overruns.
Fiscal Sustainability:
The Victorian Auditor‑General warns that the state’s current trajectory is unsustainable without stronger cost controls and revenue measures.
Victoria’s reliance on large‑scale borrowing exposes it to interest rate risks and limits fiscal flexibility.
Long‑term commitments (e.g., in health, education, and transport) will further strain the budget.
Governance and Transparency:
While the financial statements were deemed accurate, the Auditor General criticised the state government for not fully disclosing the scale of project blowouts and contingent liabilities.
It also called for improved reporting frameworks to give Parliament and the public clearer visibility of risks.
The Takeaway:
The Victorian Auditor‑General’s assessment explains why the state government is pleading with Canberra for an additional $9 billion of funding for the Suburban Rail Loop and why Premier Jacinta Allan is seeking to effectively privatise the provision of infrastructure and service delivery by tapping the private sector and superannuation funds to deliver what the state is supposed to do.
The state is broke.
