Victoria faces a large unfunded public sector superannuation liability, with $18.3 billion remaining to be funded by 2035, which is four times the expected annual top-up payments in the coming years.

Deferring $3 billion in top-up payments through June 2027, as promised in the 2022 election, would raise net debt and push borrowing needs higher to cover the liability, according to the Parliamentary Budget Office.

VAGO warns the liability is sensitive to investment performance, inflation, and wage/pension growth, meaning lower returns or higher salaries could increase required contributions.

Historically, the 2000 Labor government pledged full funding by 2035 through top-up contributions, shifting away from paying benefits as accrued.

The government plans to contribute about $500 million annually over the next two years, but funding would need to rise to about $2.1 billion annually from 2028 to meet the 2035 target, according to VAGO.

The article notes political dynamics: opposition emphasizes budget repair and debt, while the government points to a $4 billion savings plan and public sector reforms, with mid-year budget updates projecting a surplus despite higher spending and tax exemptions.

Opposition frames the deferral as economic vandalism, arguing it could borrow billions more and worsen Victoria’s debt situation.

Deferring contributions would not stop benefits and would significantly increase future top-up payments required beyond 2026-27, per a 2023 ministerial brief obtained via FOI.

Overall, the piece analyzes the sustainability and political risks of meeting Victoria’s 2035 funding target for the unfunded superannuation liability.

Auditor-General’s Office notes 2024-25 contributions fell short by $200 million, widening the gap from the $8.4 billion contributed over the past decade to the $18.3 billion needed by 2035.