The Andrews government has pocketed a $1 billion budget windfall after the scrapping of COVID-19 restrictions sparked a pokies tax bonanza and a labour market rebound.

Victoria finished the September quarter with a $1.4 billion deficit, according to the latest budget update from the Department of Treasury and Finance – but that figure is expected to balloon to $10.2 billion by the end of this financial year

A strong labour market and gambling taxes are a windfall for Treasurer Tim Pallas’ budget bottom line.Credit:Jason South

The budget has been buoyed by a rise in employment and increased taxes flowing in after the government dropped almost all COVID-19 pandemic restrictions at the end of 2021.

Gambling taxes totalled more than $600 million, with $353 million coming from electronic gaming machines – more than double the amount from the same time last year.

The government’s total spending decreased by $3 billion compared with the same period last year because it no longer needed to provide financial support to businesses affected by COVID-19 lockdowns, according to the report. The total revenue also increased by $2 billion over that time.

“[The jump in taxation revenue] was primarily due to an increase in payroll tax due to the strong labour market, and the introduction of the Mental Health and Wellbeing Levy (MHWL) which came into effect on 1 January 2022,” the financial update states.

“Gambling taxes from electronic gaming machines also drove the increase due to the lifting of public health restrictions on in-person gambling venues when compared with the same period last year.”

Victoria’s unemployment rate was 3.7 per cent in November, according to the most recent Australian Bureau of Statistics data, compared with 4.7 per cent at the same time last year.

The state reaped $1.8 billion in payroll tax in the three months to September and $200 million from the MHWL, which applies to businesses that pay Victorian taxable wages of more than $10 million nationally.

Credit rating agency Standard & Poor’s last month warned Victoria was in the weakest fiscal position of any state in 40 years and was deteriorating.

Shadow treasurer Brad Rowswell says the financial update shows Labor delivered a “stocking of coal” for every Victorian.

The agency uses a different accounting method to assess the financial position of governments than that preferred by federal and state treasury departments. The rating agency places a greater emphasis on cash flow and the gross debt borne by governments and all public-funded agencies.

Under this accounting method, Victoria is heading towards a tax-supported debt of $195 billion by mid-2026, nearly double that of Queensland. Treasurer Tim Pallas’ budget papers, however, show Victoria’s debt topping $165 billion by mid-2026.

A Victorian government spokesman said the quarterly update showed the government’s plan for economic recovery was working.

“Our economy has rebounded with vigour and that is reflected in strong jobs numbers across the state,” the spokesman said.

“Victoria is the only state to have developed and stuck to a fiscal recovery plan. We have consistently reported and delivered against that plan since the 2020 Budget.”

But Shadow treasurer Brad Rowswell said the update showed the government was “delivering a stocking of coal” for every Victorian.

“At a time when Victorians are trying to make ends meet and live within their means, whilst being up against rising costs, the government’s recklessness knows no bounds,” he said.

“Responsible economic management means balanced budgets, living within our means and a mix of responsible taxation and equally responsible spending. Today’s numbers fail on every measure.”

Economic management and Victoria’s fiscal position were at the forefront of the state election campaign last month, but few solutions have been offered about how to tackle the state’s burgeoning debt.

Pallas has promised to get the budget back into surplus in 2025-26. Ahead of the election, Labor and the Coalition both said they would raid the budget’s contingency provisions, which are factored into the budget bottom line to guard against unforeseen economic shocks or other unpredictable events such as natural disasters.

The Coalition had said it would draw down $7.6 billion from operational contingencies, while Labor claimed $2.6 billion.

The Victorian government has been contacted for comment.

The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.

Most Viewed in Politics

From our partners

Source: Read Full Article