According to a recently released report, more than 50 state government agencies and services experienced deficits in the last financial year, resulting in combined operating losses exceeding $1 billion. These findings shed light on the economic difficulties faced by these agencies in 2022-23, with inflation driving up operating costs and rising interest rates putting pressure on their balance sheets.
The reports, which provide comprehensive financial statements and operational details of various departments and bodies, offer a current snapshot of the financial challenges faced by state agencies. While some agencies recorded smaller deficits ranging from $10,000 to $5 million, others experienced significant losses.
For instance, the Department of Health reported a loss of $415.5 million, primarily due to the costs associated with the ongoing pandemic. The department provided personal protective equipment (PPE) and rapid antigen test kits to health services free of charge throughout the year, resulting in a financial burden.
Other agencies that recorded losses include WorkSafe, which reported a deficit of $176 million despite receiving a cash injection of $300 million from the state government. The losses were mainly attributed to the rising costs of providing compensation for workers. Additionally, the Victorian Managed Insurance Authority incurred a $115.4 million deficit due to claims arising from the collapse of residential building companies and recovery efforts following damaging floods.
The Department of Families, Fairness and Housing also reported a significant deficit of $264.7 million, largely driven by a $222.3 million loss at the state’s public housing operator, Homes Victoria. These losses raise concerns about the financial sustainability of key Victorian agencies and their ability to manage money effectively.
In light of these findings, there is growing criticism of the Labor government’s ability to deliver services in a sustainable manner for Victorian taxpayers. Opposition finance spokeswoman Jess Wilson pointed out the ramifications of mismanagement, including higher WorkCover and housing insurance premiums, as well as new taxes on leisure activities.
Economist Saul Eslake highlighted that wages were the biggest cost for government agencies, and the federal Parliamentary Budget Office’s national fiscal outlook expressed concerns about Victoria’s finances at a broader budget level. While Victoria’s economy remains strong and efforts to repay debts are on track, the state’s exposure to interest rate rises poses a potential risk.
As the state government navigates these financial challenges, it will be essential for them to strike a balance between generating new revenue and managing spending in key areas such as education, healthcare, and housing. With ongoing economic uncertainties, prudent financial planning and decision-making will be crucial to ensure the long-term stability and prosperity of Victoria.