Victoria to slow down in difficult times
This Budget prioritises paying down debt instead of honouring election commitments like the Airport Rail Link, paid sick leave scheme for casuals and the Best Start, Best Life reforms.
With net debt forecast to rise in dollar terms each year over the forward estimates and net debt as a per centage of gross state product (GSP) only slightly declining by 0.1% in 2027-28, it remains to be seen if voters and ratings agencies will be convinced by the government’s efforts.
Delivering his tenth, and possibly final, budget today, Treasurer Tim Pallas has announced a surplus of $1.5 billion, forecast net debt of $156.2 billion peaking at $187.8 in 2027-28, delayed Melbourne Airport Rail by at least four years, scrapped and delayed election commitments including a signature Dan Andrews policy of paid sick leave scheme for casuals.
Whilst Premier Jacinta Allan’s first budget contains no new taxes, flagship reforms of former Premier Andrews have been significantly impacted. There will be a more gradual approach to the rollout of the Mental Health and Wellbeing Locals support service and Best Start, Best Life reforms including free kinder and increased hours, citing workforce shortages.
Government investment in infrastructure will decline from $24 billion in 2023-24 to a forecast $15.6 billion by 2027-28, with the Allan Government heeding the advice of ratings agencies to control the infrastructure pipeline to maintain their AA rating with Standard and Poor’s and Aa2 with Moody’s Investors Service.
The centrepiece of this year’s Budget is the announcement of a $400 per child School Saving Bonus designed to help families pay for uniforms, camps and excursions and tripling the Glasses for Kids program for eyesight tests.
The State’s First Home Buyer Scheme has received one year of funding totalling $700 million but will then be wound down in favour of the Commonwealth Government’s Help to Buy shared equity scheme.
Overall, the Budget is very restrained with minimal investment into new programs and limited refunding of politically sensitive lapsing programs. The last 10 years under Labor has seen the Victorian Government massively expand spending and service provision in the areas of mental health, domestic violence, and early childhood education.
This spending combined with one of the largest capital infrastructure programs in Australian history has left the Victorian Government with record debt levels, with State debt forecast to hit $187.8 billion by June 2028.
Changes to taxes for businesses
- From 1 July 2024, the Government will progressively abolish land transfer duty on commercial and industrial property, replacing it with a more efficient commercial and industrial property tax.
- A new commercial and industrial property tax will commence ten years after the property transacts and be paid annually by the property owner. The commercial and industrial property tax will be set at one per cent of the unimproved site value of land.
- To harmonise with levy rates in New South Wales and South Australia, Victoria’s metropolitan industrial and municipal waste levy will be increased to $169.79 per tonne from 1 July 2025.
- From 1 July 2024 the Fire Services Property Levy will increase to collect revenue in line with statutory parameters.
- Commencing in the 2025 land tax year calendar year, the government will introduce a standalone land tax exemption for land that is used to provide social and emergency housing and charity owned land where social and emergency housing is under development
Infrastructure projects on hold
- The inability to reach an agreement has led to the Melbourne Airport Rail project delayed by at least four years.
- There is also confirmation that the Metro Tunnel and North-East Link won’t be delivered until 2025, and Melbourne Airport Rail will be delayed by at least four years.
- For the Metro Tunnel project, new campuses for the Royal Melbourne and the Royal Women’s hospitals will no longer be above the Arden station and instead relocated to Parkville to prevent electromagnetic interference from the underground trains to medical equipment
Healthcare to meet future needs
- The Budget invests $11 billion to meet the future heath needs of Victorians, helping hospitals care for patients and continue to recover from the impacts of the COVID-19 pandemic. This includes $146 million to support ambulance capacity.
- Major upgrades to the Northern Hospital, Austin Hospital and Monash Medial Centre remain in progress but only a fraction of the $1.7 billion required for the three projects will be delivered next financial year
Putting the brakes on early years education infrastructure
- The Andrews era Best Start, Best Life reforms including Free Kinder, Pre-Prep and Three-Year-Old Kindergarten have been put on hold with funding only confirmed for 2024-25 and an estimated completion date revised to ‘tbc’.
- The Pre-Prep element of Best Start, Best Life has been revised to a 15-year infrastructure program with an overall program completion date of 2036-37.
- Despite this, the Budget invests more than $1.8 billion to build, maintain and upgrade schools across Victoria, including $1 billion to build 16 new schools and an additional stage at two recently opened schools, and $227 million to upgrade classrooms and facilities at a further 25 schools. Funding also includes $250 million for school maintenance, and $187 million for the Relocatable Buildings Program.
- The $287 million one-off School Saving Bonus will give families with children at government schools and eligible families in non-government schools $400 to help cover the cost of uniforms, school camps, excursions, and other extracurricular activities.
- Additional support includes $6.8 million to triple the size of the free Glasses for Kids program, and $6 million to extend the Get Active Kids Vouchers program
What’s next?
It’s likely the Opposition will make debt and deficit a central theme of the campaign for the next state election (November 2026), whilst the Government defends itself from accusations of broken promises to families and people in insecure work.
Contacts
To discuss the opportunities that this budget presents for you, please contact:
Andrew Anson, Associate Partner, Communications, SEC Newgate – [email protected]
Nicoleta Romas, Account Director, Communications, SEC Newgate – [email protected]
