Report of the Auditor-General on the finances of the State of Victoria, 2002-03
Overview
The State’s financial condition remains sound, however annual operating surpluses continue to decline, notwithstanding the strong economic activity levels in Victoria. While there has been a 21 per cent growth in State revenues over the 5 year period 1999–2003, expenditure levels have increased at a greater rate, at 35 per cent. The level of expenditure is not only growing in nominal terms but in the last financial year, it increased marginally faster than the growth in the Victorian economy. Any downturn in the economic cycle and further expenditure pressures, including wage growth, beyond those anticipated will place pressures on the State’s finances. The variability in investment returns and superannuation costs highlights the State’s vulnerability to movements in financial markets. While the strong property market has positively contributed to the State’s operating result, the unpredictability of this market presents a risk to future State revenue levels. The trends in the State’s finances demonstrate a continuing need for vigilance by the Government to ensure that public sector activity and program levels remain sustainable in the longer-term. To this end, the ongoing imperative for the Government remains that of ensuring that the key risks to the State’s finances are regularly reviewed and factored into ongoing financial planning and management.