Victoria Becoming Australia’s Detroit

Years ago on here I said multiple times that Victoria would be in deep economic shit largely because Dan Andrew’s had planned to fund his Big Build by the Belt and Road Initiative deal he’d made with China. When that got tore up I said they were fucked because how else would they pay for it, even bringing 100,000 Indians a month won’t keep the lights on.

So Peachy this is another time we got it right on EZFKA 😉

Victoria is not a failed state in the literal sense. Its institutions function, its economy remains, and Melbourne was once one of Australia’s most important cities.

But something has gone badly wrong.

Victoria is not a failed state. Not yet but it sure keeps edging towards the cliff…

I think it is fair to say that Victoria is showing some of the early characteristics of one.

When most people hear those words they think of countries where governments have collapsed, infrastructure barely works and law and order has broken down. Victoria is obviously nowhere near that (yet).

But states and cities do not normally collapse overnight. They decline slowly.

Debt starts rising. Government gets bigger. Taxes increase. Infrastructure becomes more expensive. Public services struggle to keep up with population growth. Housing becomes unaffordable. Crime becomes more common. Productive industries disappear. Businesses start looking elsewhere. Governments respond by spending even more money trying to fix the problems created by the previous spending. We are seeing all these things today.

Eventually, people start asking what happened.

I believe Victoria is somewhere near the beginning of that process and Victorians are the frogs in the pot with the heat slowly being turned up.

The worrying thing is that Melbourne is still wealthy enough to hide many of these problems. There is still plenty of money in the state. Melbourne is still a great city. But that does not mean the direction is sustainable.

The debt is the first warning sign

According to the Victorian Government’s 2026-27 Budget, net debt was $150.9 billion in 2024-25. It is expected to reach $175.6 billion in 2026-27 and then continue climbing to $199.3 billion by 2029-30.

Almost $200 billion.

For a state of roughly 7.1 million people, that is an enormous amount of debt.

The government will argue that debt is being used to build infrastructure, and there is some truth to that. Borrowing to build something productive can be sensible. Governments have always borrowed money to build roads, hospitals, railways and other infrastructure.

But eventually you have to ask whether the amount being borrowed is justified by the economic return.

The interest bill is particularly concerning. As debt continues to grow, so does the amount of money Victoria has to spend servicing it.

That is money that cannot be spent elsewhere.

It is money that cannot reduce taxes.

It cannot improve hospitals.

It cannot employ more police.

It cannot be invested in new industries.

It simply pays for decisions that were made years earlier.

This is the part of government debt that people often forget. Borrowing is easy because the benefits are immediate and the costs are delayed.

Politicians get to open the new tunnel.

The next generation gets the bill.

The Big Build

The other side of this equation is Victoria’s enormous infrastructure program.

The Big Build has become one of the defining features of Victorian politics.

Metro Tunnel, West Gate Tunnel, North East Link, level crossing removals and the Suburban Rail Loop have involved extraordinary amounts of money.

The Victorian Government says it has committed more than $112 billion to planning, building, running and upgrading the transport network since 2014.

Government infrastructure investment reached $24.2 billion in 2023-24 and $23.5 billion in 2024-25. It is forecast at $21.4 billion in 2025-26 and $19.4 billion in 2026-27.

Again, I am not arguing that all of this infrastructure is bad.

Some of it is clearly useful.

The Metro Tunnel is useful. Removing dangerous level crossings is useful. Better roads are useful.

But there is a difference between saying infrastructure is useful and saying every infrastructure project is worth whatever the government eventually spends on it.

That is the debate Victoria has not had enough of.

The Suburban Rail Loop is a good example. The government sees it as a transformational project and also as a way of supporting housing development around new transport hubs.

Maybe it will prove to be a brilliant investment.

But when a government already has nearly $200 billion of net debt on the horizon, every enormous project needs to be judged extremely carefully.

There is an opportunity cost to everything.

If you spend $20 billion on one project, that $20 billion cannot be spent somewhere else.

It could reduce debt.

It could reduce taxes.

It could upgrade existing roads.

It could expand hospitals.

It could be left in the private sector where businesses could invest it.

That is basic economics.

Is Victoria building for growth, or building to keep up with growth?

This brings me to another problem that I think Victoria has largely ignored.

Population growth.

Victoria’s population increased by approximately 117,300 people during 2025. Net overseas migration accounted for 85,044 of that increase, making it by far the biggest contributor to population growth.

There is nothing inherently wrong with immigration.

Australia has “benefited” enormously from immigration over many decades.

Immigrants work, start businesses, pay taxes, fill skills shortages and contribute to Australian society.

The problem is the speed and scale of population growth relative to the capacity of the state to absorb it.

If you add one hundred thousand people to Melbourne every month, those people need houses.

They need schools.

They need hospitals.

They need roads.

They need trains.

They need water.

They need electricity.

They need police.

They need jobs.

They need all the things that existing Victorians already need.

And if infrastructure does not keep pace, somebody pays the price.

That somebody is usually the existing population.

They pay through higher housing costs, congestion, longer commutes, crowded public transport, pressure on hospitals and higher taxes.

This is where I think the immigration debate in Australia has become too simplistic.

The argument should not be “immigration is good” versus “immigration is bad.”

The real question should be:

How many people can Victoria sustainably accommodate, and what type of population growth actually improves living standards?

A bigger population does not automatically mean a richer population.

GDP can rise simply because there are more people.

That does not necessarily mean GDP per person, housing affordability or quality of life is improving.

There is a big difference.

The housing problem

You only have to look at Melbourne’s housing situation to see the problem.

The government is now spending money trying to increase housing supply while simultaneously planning for continued population growth.

The Suburban Rail Loop is even being promoted partly as a housing project, with the government saying the first stage will help support around 70,000 new homes over 30 years.

This creates a strange situation.

Victoria brings in large numbers of people.

Then we need to build houses for them.

Then we need infrastructure for those houses.

Then we need more government spending to provide that infrastructure.

Then we need higher taxes to pay for the spending.

And then we tell ourselves that population growth is creating economic prosperity.

Perhaps it is.

But perhaps some of the apparent economic growth is simply the government running faster to keep up with the population it has helped create.

That is a question worth asking.

And then there is crime

Crime is another area where Victorians are entitled to be concerned.

The latest figures are not good.

Victoria recorded 630,592 offences during 2025, an increase of 4.2 per cent from the previous year. The recorded offence rate, which takes population into account, also increased by 2.4 per cent.

The number of criminal incidents reached 473,262, the highest recorded figure since the Crime Statistics Agency began reporting in 2004-05.

Car theft has become a particularly serious problem.

Theft from motor vehicles reached 82,947 offences in 2025, while Victoria Police reported that car theft had reached its highest calendar-year level since 2001.

This isn’t simply about statistics.

People notice when their neighbours are being robbed.

They notice when shops need security guards.

They notice when cars disappear from driveways.

They notice when young gangs are involved in home invasions and carjackings.

And they notice when they no longer feel comfortable walking around parts of their own city at night.

I don’t think it is reasonable to blame immigration itself for Victoria’s crime problem. The data do not establish that relationship, and crime has many causes, including repeat offending, youth offending, drugs, cost-of-living pressures and organised crime.

But rapid population growth still creates a challenge for policing and public services.

More people means more demand on the police, courts and justice system.

If the government wants rapid population growth, it needs to make sure the institutions responsible for maintaining public order grow with it.

Otherwise the state is effectively trying to run a bigger city with the same limited capacity.

The loss of manufacturing

There is another reason the Detroit comparison matters.

Victoria has already experienced a significant decline in its traditional manufacturing base.

The closure of Australia’s car manufacturing industry was an enormous economic and social change.

Ford, Holden and Toyota once represented a large part of Australia’s industrial identity.

Those factories did not just employ people directly.

They supported suppliers, mechanics, engineers, transport companies, tradespeople and entire communities.

That industrial ecosystem has largely disappeared.

Melbourne is fortunate that it has a much more diversified economy than Detroit did.

But this is where I think the Victorian Government’s economic strategy deserves criticism.

There is a tendency to treat government construction as though it is the same thing as productive industry.

It isn’t.

A factory can manufacture products and sell them around the world for decades.

A technology company can create intellectual property and export it.

An agricultural business can produce food for international markets.

A construction project employs people while it is being built. Once it is finished, the construction activity stops.

The infrastructure can certainly provide an economic benefit afterwards, but the distinction is important.

Victoria needs more productive industries, not simply more government projects.

The Belt and Road mistake

This brings us to China.

In 2018, Victoria signed a Belt and Road memorandum of understanding with China.

At the time, Daniel Andrews argued that the relationship was important for Victorian farmers, manufacturers, workers and businesses.

The agreement included potential cooperation involving manufacturing, biotechnology and agriculture, as well as trade and market access.

The Commonwealth Government eventually cancelled the Victorian agreements in 2021.

The federal government argued that they were inconsistent with Australia’s foreign policy. China strongly criticised the decision.

Now, I think it is important to be honest about this.

The Belt and Road agreement was not a $50 billion cheque from China.

It was not a guaranteed investment program.

The original MOU was not legally binding and had not yet produced the promised economic projects. But you can be pretty sure that was the plan given the way things have played out since.

If you are a state with enormous debt, high taxes and a need for investment, you should be looking everywhere for productive economic opportunities.

You should be trying to attract international capital.

You should be trying to grow exports.

You should be trying to create businesses that employ people and generate tax revenue.

You should not be relying almost entirely on government borrowing to drive economic activity.

Melbourne and Detroit

This is where I think the Detroit comparison becomes useful.

Detroit was once one of the richest cities in America.

It was the centre of the global automobile industry.

It had enormous factories, highly paid workers, major companies and a huge tax base.

It seemed almost impossible that Detroit could fail.

But cities do not stay successful automatically.

Detroit’s decline took decades.

Industry declined.

Jobs disappeared.

People left.

The tax base weakened.

Government finances deteriorated.

Infrastructure aged.

Crime became a major problem.

The city eventually became a symbol of urban decline.

Melbourne has a diversified economy, excellent universities, major financial institutions, tourism, technology, agriculture and strong international connections.

But that is exactly why Detroit should be treated as a warning.

The lesson is not that Melbourne is going to become Detroit.

The lesson is that great cities can lose their economic advantages if governments make enough bad decisions for long enough.

And I think Melbourne is at the stage where we should be asking whether the warning signs are starting to appear.

The cycle that worries me

The thing that concerns me most is how all these issues interact.

Debt leads to higher interest costs.

Higher interest costs put pressure on the budget.

Population growth increases demand for infrastructure and services.

More infrastructure requires more government spending.

More spending requires more revenue.

Higher taxes can make investment less attractive.

Less private investment means the government becomes even more important to economic activity.

Crime increases pressure on police and the justice system.

Housing shortages increase the cost of living.

Higher living costs make it harder for ordinary people to get ahead.

Then the government announces another major project to solve another problem.

And the cycle continues.

None of these problems individually means Victoria is failing.

But put them together and you can see why I describe Victoria as a failed state in the early stages.

Victoria still has a choice

Victoria hasn’t failed yet.

I think Victoria is at a crossroads.

It can continue along the current path, borrowing more, taxing more, building more and hoping economic growth eventually catches up.

Or it can start making some difficult decisions.

It can prioritise infrastructure instead of simply announcing it.

It can focus on productivity instead of population growth.

It can attract private investment instead of relying so heavily on government investment.

It can rebuild productive industries.

It can take crime seriously.

It can make housing supply a genuine priority.

It can pursue international trade opportunities while still protecting Australia’s national interests.

And it can start treating debt as a problem rather than simply another source of funding.

Melbourne is still a great city.

That is what makes this debate so important.

We are not trying to save a city that has already collapsed.

We are trying to prevent a successful city from making the mistakes that eventually destroy successful cities.

Detroit did not become Detroit in one year.

It happened slowly.

There were warning signs.

People ignored them because the city was still rich.

Then it was less rich.

Then it was struggling.

Then it was in decline.

By the time everyone agreed there was a problem, the problem had become extremely difficult to fix.

Victoria still has the enormous advantage of time.

But time is only useful if you use it.

Victoria is not a failed state today. It is something more dangerous politically: a prosperous state that is beginning to behave as though its prosperity is guaranteed.

That is the point at which people should start paying attention.

Because Melbourne does not need to become Detroit.

It only needs to make enough of the same mistakes.