‘A milking cow’: states lash Commonwealth over infrastructure funding

On Wednesday, Mr Pallas described the mid-year economic and fiscal outlook (MYEFO), which showed Victoria’s share of total infrastructure funding had dropped to 19.2 per cent over five years compared with 23.5 per cent set at the May budget, as a “slap in the face”.

He said Victoria should receive 26 per cent of funding to match its share of the national population. The MYEFO documents showed $6.8 billion in new spending over the next 10 years, of which just $101.8 million was committed for projects in Victoria.

The Victorian treasurer said that while federal Infrastructure Minister Catherine King “might be pleased” that $99.1 million of the $101.8 million would go to the Western Highway upgrade in her seat of Ballarat, there was “pretty much zero” for the rest of the state.

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

“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 short-change Victorians on infrastructure.”

Victorian Opposition Leader John Pesutto said the mid-year update showed the state government’s move to sign a $3.6 billion tunnelling contract for the $125 billion Suburban Rail Loop earlier this week was “financially reckless”.

But Dr Chalmers said on Thursday that the federal government had “absolutely not” shortchanged Victoria. He said the Commonwealth had not cut money from its $120 billion 10-year infrastructure pipeline and that Victoria’s share remained about 23 per cent.

“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,” he told the ABC.

“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 on the Commonwealth budget as well. I believe we make more progress when we work together, rather than take shots at each other.”

The states’ backlash comes more than a month after Ms King released an infrastructure policy statement, which scrapped dozens of projects around the country, including 17 in NSW and 12 in Victoria.

Mr Mookhey spoke after NSW released its mid-year financial update, which revealed the state’s financial position had slid backwards by $1.7 billion since its September budget and was now on track to produce a deficit of more than $9.6 billion for fiscal 2024.

This compares with an initial expectation of a $7.8 billion deficit flagged in the budget. The state projects a surplus in 2024-25 of just $475 million, down from an earlier prediction of $844 million.

Mr Mookhey put the budget deterioration down to high inflation, steep bond yields and state insurance liabilities. Higher bond yields have added $500 million to government costs, and growing insurance liabilities will add $900 million in costs to the budget over the next four years.

Gross debt is projected to increase by $3.2 billion to $189.9 billion by June 2027, representing 21 per cent of gross state product. In net debt terms, this will represent 13 per cent of GSP.

”It’s clear NSW still faces external challenges with economic headwinds and the withdrawal of significant Commonwealth government funding,” Finance Minister Courtney Houssos said.