Victoria is ‘the milking cow of the federation’, Treasurer says

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Victorian Treasurer Tim Pallas has accused federal Labor of “reverting to the bad behaviour” of the former Coalition government by treating the state like the “milking cow of the federation”, with just 1.6 per cent of new priority infrastructure spending reaching Victoria.

The federal government on Wednesday reported a $40 billion improvement to its bottom line over the next four years in its mid-year economic fiscal outlook (MYEFO), partly driven by rising tax revenue, and announced an extra $11 billion towards priority infrastructure over the next decade.

Treasurer Tim Pallas says Victoria should be receiving 26 per cent of federal investment to match its population.Credit: Joe Armao

Less than 1 per cent of that, $101.8 million, will go towards Victoria – mostly to duplicate the Western Highway between Ballarat and Stawell.

The state should receive a share in $4.2 billion for road safety programs, but how much would flow through was yet to be determined. Of the remaining $6.8 billion, Victoria would still only take away 1.6 per cent.

It prompted a late Wednesday afternoon broadside from Pallas, who repeated his view on Thursday that Victoria had been short-changed.

“It’s wrong that we constantly are the milking cow of the federation. We’re constantly subsidising poor performing states,” Pallas said.

“That is nothing short of ludicrous. No, it’s worse than that, it is a dismissive way to treat Victorians.

“What we’ve seen in MYEFO is, effectively, the Commonwealth government reverting to the bad behaviour that we’d seen from the previous government. We’d expected better.”

He said Victoria should be receiving 26 per cent of federal investment to match its population, but that analysis of the fiscal outlook showed funding for the state had dropped to 19.2 per cent, down from 23.5 per cent at the May federal budget.

South Australia benefited from an extra $2.7 billion while Queensland will receive another $2.4 billion. Another $1.1 billion will go to projects in Western Australia, $200 million was put towards the Northern Territory, $152.6 million was for the ACT, and $115.8 million will go towards NSW.

Tasmania was the only state or territory to receive a smaller boost than Victoria, with an extra $2 million.

Federal Treasurer Jim Chalmers earlier on Thursday said Victoria had “absolutely not” been shortchanged by the federal government. He said Victoria would still receive 23 per cent of the total $120 billion 10-year infrastructure pipeline.

“When it comes to the relationship with the states, I do not take shots at the states. I’m not interested in a war of words, and I get lots of opportunities to comment on things like the cancellation of the Commonwealth Games or different tax measures that different state treasurers take in budgets,” Chalmers said.

“I say the same thing every time, which is I recognise the pressure that state budgets are under, and I ask the states and territories to recognise the ongoing pressure the Commonwealth budget is [under] as well.”

The federal government this year commissioned an independent review of the infrastructure pipeline and slashed projects but promised to keep funding already committed to each state. The mid-year update was the first opportunity to redistribute that money.

Victoria is banking on the federal government stumping up one third of the $35 billion needed for the first eastern stage of the Suburban Rail Loop, connecting Cheltenham to Box Hill.

The Commonwealth has so far committed only $2.2 billion of that, but Victoria still pressed ahead to sign the first major works contract in the week after Ombudsman Deborah Glass criticised the state’s secretive approach that cut out senior transport bureaucrats in favour of consultants.

“We’re still in discussions with the Commonwealth about what they’re going to do to rectify what seems to be the habit of a lifetime and that is, shortchange Victorians on infrastructure,” Pallas said.

Funding could have gone towards the Level Crossing Removal Project, regional roads or the Princes Highway, he said as examples.

Pallas said the federal government had also cut healthcare funding by $1.5 billion in the 2023-24 financial year, revising its budget prediction of $19.9 billion down to $18.4 billion.

He argued the Allan government had negotiated in good faith on the federal infrastructure review and when the Commonwealth was “in a pickle” over the National Disability Insurance Scheme.

“If you’ve got a problem, get the states to fix it for you. The most notable state that’s always called upon to finance the Commonwealth’s problems is the state of Victoria,” Pallas said.

Victoria’s budget update will be released on Friday.

Opposition Leader John Pesutto agreed the fiscal update was concerning for the state but that Premier Jacinta Allan was to blame because she had “messed up projects”.

“Obviously, Victoria is missing out. Victoria should be receiving more from the federal government, and we will always as an opposition and in government fight for Victoria to receive the biggest possible share that it can of federal funding,” he said on Thursday.

“We’re not because of mismanagement by the Allan government.”

He said it was financially reckless to sign the first major works contract for SRL East without certainty of the federal government’s position.

Shadow Treasurer Brad Rowswell said Victoria was relying on the federal government to bail them out and the Commonwealth did not appear to trust the state’s infrastructure program.

“If you ever need a clearer sign that Victoria is broke and that we can’t afford what we’ve been signed up for, here it is.”

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