We will soon know the direction the state government will take with respect to the economic housekeeping that the state with the largest debt in the entire country so desperately needs.
While nothing is coincidental the dire state of Victoria’s economy dictates that highly measured and calculated financial moves must be made so that essential services can remain intact while at the same time taming unnecessary costs.
The biggest ‘patient’ in the whole affair is the Victorian health system. On the flip side, the big culprit is the overblown budgets of giant infrastructure projects.
Examples to be avoided are the Commonwealth Games fiasco and the West Gate Tunnel, whose construction was delayed for at least 3 years and costs ballooned to an additional $4 billion.
The “rave riot” that the Allan administration is being asked to carry out requires a cautious approach so as not to worsen the “patient’s” condition and bring about the much desired improvement in the health care system that our state so desperately needs.
Figures show that hospitals have debt in excess of $1.46 billion, with estimates suggesting that this will increase to $3 billion by the end of this fiscal year.
Health experts claim that hospitals operating in the red will need a significant funding boost or be forced to cut staff and critical frontline services, as the Victorian Health Care Association has already warned.
As Treasurer Tim Pallas prepares to present his tenth consecutive budget, government sources say addressing the hospital deficit will be a priority.
However, this will likely involve an expected realignment of health services, including forced mergers of some services. Such a ‘solution’ would be a heavy blow to the sector and therefore to the public.
The “patch up”
The answer to the big budget dilemma is probably to be found in the latest report from Deakin University’s Megaprojects research group, which suggests that contractors should be given better incentives to stick to project budgets and that a team of experts should be set up to scrutinise the details of contracts to limit Big Build budget blowouts.
The Group estimated that the tens of billions of dollars of cost overruns of recent years could have been avoided if the type of contract structure used by Major Roads Projects Victoria, which allows independent experts to “challenge” contract estimates and adopts a system of, cost and profit sharing, had been used.
The West Gate Tunnel project is a prime example of the failure of the current system: instead of the parties working on solutions, they were locked into positions and fought battles in the courts, resulting in a three-year delay and some $4 billion in budget blowouts on that project.
