Victorian Treasurer Announces Resignation As State Grapples With Mounting Debt

His resignation includes the decision to leave his position as the Member for Werribee leading to a by-election for the post.

Now-former Victorian Treasurer Tim Pallas speaks to the media during a press conference in Melbourne, Australia, on May 30, 2021. Daniel Pockett/Getty Images

Victorian Treasurer Tim Pallas has announced his surprise resignation on Dec 16, stepping down after a decade in the role and 18 years in politics.

His resignation, which means he will be vacating his position as the Member for Werribee, will trigger a by-election in the coming months.

Pallas’s departure comes just two days after presenting the state’s mid-year budget update, which projected a significant budget deficit.

Victoria is Australia’s second most populous state, and the second largest state economy.

A Decade of Service and Concerns Over Huge Debt

Pallas, one of the longest-serving treasurers in Victoria’s history, confirmed his decision in a statement, highlighting the importance of renewal within the government.

“Renewal is important, and after 10 years as treasurer it is time for me to hand over the reins. Importantly, this will allow the government to establish the strong team that will contest the 2026 election,” he said.

His resignation follows a budget update on Dec. 13, which revealed a projected $3.6 billion deficit for the 2024-25 financial year.

The budget, delivered earlier in May, had already indicated delays to more than 100 major projects, including significant plans for the Royal Melbourne and Royal Women’s hospitals.

Pallas’s final budget update also forecasted the state’s net debt would reach $155.2 billion by July, driven by higher spending on infrastructure projects, such as the Melbourne Metro Tunnel, and $1.5 billion to the state’s healthcare system.

The state’s overall debt is now equal to a quarter of the state’s overall economic output per year at $568.9 billion.

Pallas reassured the public that the state was on track to achieve a surplus in the following year.

“Our economic future is secure,” he declared on Dec. 13.

Premier Allan Pays Tribute, Amid Growing Party Frustrations

In response to Pallas’s resignation, Premier Jacinta Allan expressed her gratitude and personal connection to the long-time treasurer.

“Tim and I first met in 1999, when I was the fresh-faced, newly-elected member for Bendigo East, and he was working in one of the toughest gigs there is–Chief of Staff to the Premier,” Allan said.

She further emphasised their strong professional relationship, describing Pallas as a collaborator, builder, and most importantly, a mate.

Despite the personal tributes, insiders have suggested that growing concerns over the state’s rising debt and deficit were contributing factors to internal rifts within the Labor Party.

The state is also grappling with increasing taxes, as the government aims to address the mounting fiscal challenges.

The mid-year budget update revealed a $1.4 billion downward revision in net result transactions, further compounding the state’s financial difficulties.

Analyst Says By-Election Will Test Labor’s Popularity

Election analyst Kos Samaras of RedBridge Group, said the by-election Werribee in Melbourne’s south-west would be a “crucial test” to see how the Labor Party was faring with voters.

“For Labor, it’s an opportunity to demonstrate it can shore up its once-reliable ’red wall,' which increasingly resembles a fragile fence,” he wrote on X.

“Meanwhile, the Liberal Party faces the challenge of countering unfavourable demographic shifts in Melbourne’s inner east by proving it can win in seats like Werribee. The Coalition’s Shadow Cabinet has made several visits to the area, signaling they are taking this contest very seriously,” Samaras said.

“It’s going to be very interesting.”

Samaras has warned Labor’s progressive policies are increasingly isolating it from its once stable support base in suburban electorates. Voters in suburbia are typically aspirational, and their interests inherently conflict with the policies of strong left-wing and progressive causes.

Victoria Marked the Worst Business Environment in the Country

Victoria’s business environment has also come under scrutiny, with the Business Council of Australia (BCA) ranking the state as the least business-friendly in the country.

The annual review by the BCA noted that businesses, particularly cafes, childcare centres, and retailers, face more licensing requirements in Victoria than in most other states.

The report labelled the state’s regulatory environment as the “most challenging” in Australia, highlighting that Victoria has the “furthest to go” to improve its business conditions.

In an effort to address these concerns, Allan unveiled the state’s Economic Growth Plan.

The plan includes measures to streamline processes for hospitality businesses, speed up environmental approvals, and create a single portal for investors. The government also aims to unlock 6,000 hectares of industrial land, valued at $9.5 billion, to boost development.

Furthermore, the government introduced a $20 million Victorian Industry Development Fund to target five key sectors: advanced manufacturing and defence, health technologies, the circular economy, digital innovation, and agribusiness.

As part of the plan, Labor has committed to cutting red tape, aiming to save $500 million over the next five years and reduce the number of regulators from 37 to 18 by 2030.