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Victorian Treasurer Tim Pallas.Credit:Joe Armao

Labor – which has been accused by the Coalition of financial mismanagement – said the $500 million jump in the deficit stemmed from more spending oncommunities hit by recent floods,which created potholes in roads and serious damage. The cost also served to highlight the financial impact of extreme weather events which are worsened by climate change.

Despite ballooning borrowings,Treasury forecasts Victoria’s near record-low unemployment rate,which is less than 3 per cent in regional Victoria,will remain below 4.5 per cent until 2026 despite the spectre of a global recession triggered by interest rate rises and energy supply shocks.

Treasurer Tim Pallas said in a statement that the new figures proved Labor’s “economic recovery plan is working”.

“While Matthew Guy’s Liberals want to try to cut and close their way out of the pandemic,we’re proud to be investing in the projects and the people that will grow our economy and ensure our recovery,” he said.

The government estimates the budget will return to surplus – allowing the state to begin paying down debt – in 2025-26,and the projection for net debt has also been reduced by $1.6 billion since May.

But Victoria is still forecast to owe $165.9 billion in June 2026,which the opposition repeatedly emphasises will be more owed by the same date by NSW,Queensland and Tasmania combined.

Interest payments on state debt will total $7.5 billion in 2025-56,up from $3.9 billion this year.

Shadow treasurer David Davis claimed the pre-election fiscal statement was another troubling sign that Victoria’s debt level would require higher taxes and lead to lower living standards for future generations forced to pay down debt.

“It is an extraordinary deterioration in just a week and a bit – half a billion dollars in just over a week,” he said.

“Victoria is being weakened by Daniel Andrews and his government. They have made it harder for us in the future and … we will face a more difficult future because of their inability to manage money.

“The state government does not have control of its deficit.”

Debt and deficit has grown into one of the most pertinent issues in the campaign for the November 26 election. The Coalition has sharpened its attack lines on Labor on financial management,and reduced its focus on healthcare andshelving the Suburban Rail Loop.

Arecent Resolve survey showed voters believed the Coalition’s strongest policy area was financial management.

Age readers surveyed as part of ourVictoria’s Agenda project have expressed concern about project mismanagement leading to cost overruns and adding to net debt projections.

The new fiscal data reflectsthe $15 million sponsorship deal signed by the Andrews government and Netball Australia. The amount filled the gap left when billionaire Gina Rinehart’s withdrew her sponsorship of the Diamonds,after the netballers supported teammate Donnell Wallam,who raised concern about wearing the Hancock Prospecting logo in response to racist comments made by the company’s late founder,Lang Hancock in the 1980s.

The Coalition has pledged to establish a debt cap,though it has not said how high it would be. It has also promised to reduce seven taxes,audit major projects worth more than $100 million and shelve the first stage of the Suburban Rail Loop,which it says would save the budget about $8 billion.

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