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Victoria racks up a $10.1 billion deficit

Victoria recorded a deficit of $10.1 billion for the first half of the 2020/21 financial year, as the cost of the state’s revamped hotel quarantine program is revealed.

The deficit, contained in the mid-year financial report tabled in parliament on Friday, was attributed to the impact of the coronavirus pandemic and subsequent slowdown in the state’s economy.

Net debt increased by $17.4 billion to $61.7 billion to pay for the government’s response to the pandemic as well as a suite of infrastructure projects.

Total revenue for the six months to December was $30.9 billion, about 46 per cent of the published full-year budget estimate and a decrease of $2.5 billion from the same period last year.

This was in part due to the closures of Crown Casino, hotels and clubs depriving the state of gambling taxes, and the reduction in payroll tax as Victorians worked fewer hours and the government offered up waivers and refunds.

Land transfer duty similarly declined due to a subdued property market.

The state was forced into a second lockdown in July, lasting 112 days, after coronavirus escaped hotel quarantine and spread into the community, killing hundreds.

A new-look hotel quarantine program began in December, before international flights were suspended on February 13 after another outbreak was linked to the Holiday Inn at Melbourne Airport.

The outbreak triggered a five-day, circuit-breaker lockdown.

The report revealed the state government in September entered into “numerous contracts” with transport, health and hotel providers to deliver the new hotel quarantine program for at least 12 months.

The estimated total cost of the contracts is $377 million.

The contracts are ongoing despite the majority of hotels remaining non-operational.

A small number of hotels are still providing quarantine services for air freight crew members.

Opposition Leader Michael O’Brien slammed the government for being “the king of waste”.

“Why on earth is this government paying $377 million for a hotel quarantine system which isn’t even working?” he told reporters.

“How does that represent value for money to Victorians?”

Shadow Treasurer Louise Staley said the report proved the government had “lost control of the state’s finances”.

“The Andrews Labor Government is leaving a legacy of debt that will take Victorian taxpayers decades to repay,” she said.

However, Treasurer Tim Pallas said the state’s economy has recovered strongly in the December quarter as restrictions eased.

After a substantial fall in employment between March and September 2020, employment increased by 170 000 people between September and December – the highest increase in the nation.

The unemployment rate declined to 6.5 per cent in December compared with a peak of 7.5 per cent in June 2020.

The state’s final demand rose by 6.8 per cent in the December quarter, led by a strong rebound in consumer spending, business investment and dwelling investment.

“After all the sacrifices Victorians have made to get this virus under control, we are seeing the rewards in a rebounding economy offering more jobs, more investment and more opportunity,” Mr Pallas said in a statement.

“Victoria was the fastest growing economy in the nation before the pandemic, and our strong fundamentals are on show now as we surge towards a healthy recovery.”

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