Victorian budget focuses on infrastructure investment

The government is stating that its investment in infrastructure spending will rise from $4.5 billion in 2015-16 to $7.5 billion in 2016-17

Surpluses to be funnelled into infrastructure and increased spending rather than tax cuts.

The 2016-17 Victorian Budget is focused on using growing surpluses from a large upswing in the property market to invest in infrastructure.

According to the Budget papers, Victoria is expected to remain in a strong financial position over the next four years with a projected budget surplus of $2.9 billion in 2016-17 and accumulated surpluses of $9.2 billion over the next four years.

This solid financial position is being driven by strong revenue growth due to extra payroll tax collections due to reasonable employment growth, very strong growth in land transfer duty, strong increase in land tax and Victoria receiving a higher share of GST revenue from the Commonwealth due to population growth.

Over the next four years, the Victorian economy is forecast to grow by an estimated 3 per cent in 2016-17 before falling back to 2.75 per cent in 2017-18. This forecast includes a modest correction in the property market in 2016-17. This correction is expected to lead to a small decrease in the amount of land transfer duty collected in 2016-17 – this tax has however grown at an average annual rate of 23 per cent over the last three years.

Victoria’s unemployment rate is expected to fall from a forecast 5.75 per cent in 2016-17 to 5.5 per cent in 2019-20.

Victoria’s net debt to gross state product (GSP) is expected to be 4.7 per cent in 2016-17 and will remain around that level until 2019-20 when it is expected to be 4.8 per cent. 

Victoria’s population is expected to grow 1.8 per cent in each of the next four years.

Infrastructure investment 

The government is stating that its investment in infrastructure spending will rise from $4.5 billion in 2015-16 to $7.5 billion in 2016-17. Infrastructure investments announced in this Budget include:

  • $10.9 billion for the Melbourne Metro rail tunnel, of which $2.9 billion will be spent over the next four years. This does not include any co-investment from the Commonwealth
  • In addition to the Melbourne Metro rail tunnel, the Government has allocated $3.2 billion in new spending on public transport across the State including $518 million to duplicate the Ballarat rail line from Deer Park West to Melton, $588 million to extend the South Morang line to Mernda and $875 million for an additional 28 high capacity Metro Trains
  • $7 billion for road projects including $1.4 billion over four years for the Western Distributor road project (without co-investment from the Commonwealth), upgrading the Monash Freeway and the Drysdale Bypass.

Trade and small business

Several initiatives have been announced to support trade and small business in Victoria, including:

  • $66 million to expand the network of Victorian Government Business Offices
  • $38 million to promote Victorian tourism and major events nationally and internationally
  • $31.9 million to promote Victoria’s as a location for international students
  • $33.8 million to drive jobs in the creative industries
  • $53 million to create Jobs Victoria
  • $9 million to promote business events$111 million to be invested into the Future Industries Fund which has been designed to help growth in the following targeted industries:
    • medical technology and pharmaceuticals
    • new energy technology
    • food and fibre
    • transport, defence and construction technology
    • international education
    • professional services
  • $24 million for Victoria’s trade mission program
  • $4 million to establish the Asia Gateway, which will assist businesses wanting to export to China by connecting them with Asia-focussed services and organisations
  • $6.6 million to implement the Koori Business Strategy, promoting entrepreneurship in the aboriginal business sector

Education and training

A major focus of this Budget is education. Additional and continued funding has been allocated towards education and training including:

  • $385 million to upgrade schools in need of repair
  • $287 million to build new schools and acquire land for new schools
  • $28 million to remove asbestos from schools
  • $92 million to introduce ten new ‘Tech’ schools
  • $10 million to expand the Back to Work Scheme for automotive workers
  • $20 million to support Back to Work Reconnect program to support young people and early school leavers undertake foundation training
  • $151 million for early childhood education

Health

The health budget will be increased by $2.45 billion which will include $169 million to redevelop Shepparton’s hospital, $61.3 million for works on the Footscray and Sunshine hospitals and $335 million to boost elective surgeries to nearly 200,000 a year.

Other health initiatives include:

  • An allocation of $346 million to mental health infrastructure and programs
  • $143 million to improve ambulance availability and improve ambulance stations.

Tax announcements

  • The Government is proposing to increase the payroll tax threshold by $25,000 each year over the next four years to $650,000 from $550,000
  • Victoria will raise the tax on foreign purchases of residential property to 7 per cent from the existing 3 per cent 
  • Victoria will increase the 'absentee landholders' levy to 1.5 per cent from 0.5 per cent, effective from the 2017 land tax year. Together, these two property tax measures are expected to raise $486 million over the next four years.
  • The government will increase royalties on brown coal threefold, bringing the royalty rate roughly in line with NSW and Queensland and is expected to raise $250 million.

According to the latest taxation revenue statistics from the Australian Bureau of Statistics, Victoria is one of the higher taxing states with each Victorian paying on average $3920 in state and local government taxes in 2014/15. Western Australians pay the highest taxes with each West Australian paying $4178 in state and local taxes, followed by NSW on $3978. The lowest taxing state is Tasmania, with each Tasmanian paying on average $2641 in state and local taxes.

Other major announcements

  • $572 million to implement all of the 227 recommendations of the Royal Commission into family violence including expanding the availability of emergency accommodation, increasing the availability of crisis support and reforms to the justice system. Work will also start on a ten-year Victorian Family Violence Plan.
  • $596 million in extra funding for more police officers and specialists, improved equipment and upgraded stations.
  • $200 million Agricultural Infrastructure and Jobs Fund.
  • $325 million regional jobs package that will promote the tourism industry, improve water infrastructure and boost market programs.
For more information visit www.budget.vic.gov.au 

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September 2020
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