Victoria is set to get just 77¢ of every $10 handed out by the Commonwealth for infrastructure, prompting further claims that the Turnbull government is overlooking Australia's fastest-growing state.
The federal Treasury's budget update has revealed just $2.05 billion has been set aside for Victorian road, rail and regional projects over the four-year budget period.
That represents 7.7 per cent of the national total – well below the state's one-quarter share of the national population. A total of $26.4 billion has been set aside to state infrastructure projects, although about $2.3 billion of that remains unallocated.
In contrast, the federal government has set aside almost $8 billion for NSW, more than 30 per cent of the national total. Queensland, which is also seen as crucial to the Coalition's electoral fortunes, will get a 29 per cent slice, while Western Australia will get 12.2 per cent.
Tim Pallas says the Commonwealth needs to help Victoria build the infrastructure it requires.Credit:Louise Kennerley
Figures released last week showed Victoria's population increased by 123,000 last financial year to almost 6.1 million. It was by far the biggest increase in the nation, and many experts now question the state's ability to cope with the growth.
State Treasurer Tim Pallas said that with the state's population growing 2.1 per cent, the Commonwealth needed to recognise it had a national responsibility to help Victoria build the infrastructure to cope.
"We'll continue to lobby the Commonwealth; we'll continue to try to impress on them that Australia actually includes a little bit more than Sydney," Mr Pallas said.
Victoria has a relatively busy infrastructure agenda. The state's budget update, released last week, showed the government is planning to spend an annual average of $8.4 billion on big projects over the next four years.
That represents a big turnaround on past spending patterns, with an annual average of $4.9 billion spent over the past decade.
The latest figures come amid growing animosity between the two tiers of government. Victoria has long accused the Commonwealth of short-changing it on infrastructure in favour marginal electorates in Western Sydney and Queensland.
The relationship was further stretched following a recent decision by the Turnbull government to deny Victoria the full amount it claimed it was entitled under the federal asset recycling initiative following the $9.7 billion Port of Melbourne lease deal.
In another potential blow, if the Commonwealth loses its top AAA credit rating as feared after revising up the budget deficit predictions by more than $10 billion, Victoria will probably suffer the same fate.
In a recent report to investors, ratings agency Standard & Poor's suggested it would be impossible for any state to be more creditworthy than the Commonwealth. The report points out that Victoria's budget remains critically reliant on the Commonwealth, with 40 per cent of the state's revenue flowing from Canberra, mostly from GST.
In a bid to head off such a threat, Mr Pallas is understood to have written to Standard & Poor's on Friday arguing that the GST should be treated as a state tax.
The letter argues that despite the Commonwealth's budget problems, Victoria's finances remain in good health, with a modest level of borrowing for infrastructure.
Maintaining the AAA rating has been an article of faith since it was lost in the early 1990s. It was regained in 1998.
Josh Gordon is The Age's state political editor. After a brief period in the Sydney banking world and the federal bureaucracy, Josh spent six years working as The Age's economics correspondent at Parliament House in Canberra. After cutting himself adrift to travel the world, he was lured back to reporting early in 2007. Most recently he has worked as The Sunday Age's politcal editor, based in Canberra, and The Age's state economics correspondent in Melbourne.