Victorian treasurer tight-lipped ahead of 'difficult' state budget
There’s a difference between spending money and spending money well.
Victoria’s Labor government will deliver its tenth budget on Tuesday and after a decade of record spending on infrastructure, health, education, family violence and mental health, Jacinta Allan’s first budget as Premier will not be pretty.
Victoria is staring down a mountain of debt worth $178 billion.
To battle this, Treasurer Tim Pallas has flagged that cuts are coming and major projects could be slowed.
Come 2027, taxpayers will be spending $24 million in interest per day to service Victoria’s debt, and a $10 billion blowout on the North East Link has killed any boost the budget was supposed to receive from a greater share of the national GST pool.
Tuesday’s budget will not be about what’s included. It will be about what’s missing or delayed in four critical areas.
Health: Community hospitals
In 2018, Labor promised to build or upgrade 10 community hospitals.
None are complete. Construction has started on five.
The remaining five at Diamond Creek, Point Cook, Emerald Hill, Pakenham and Torquay have been stuck in planning limbo.
When asked if they’d be built, Health Minister Mary-Anne Thomas did not say yes.
Mergers between public hospitals have also been floated to save money.
Royal Melbourne Hospital
In 2022, Labor promised to deliver the “biggest hospital project in Australia’s history.”
The 10-year, $6 billion project promised upgrades for the Royal Melbourne and Royal Women’s hospitals, as well as a brand new medical precinct at Arden.
Labor pledged $2.3 billion between 2022 and 2026.
Just $75 million was allocated in last year’s state budget. How much of the remaining $2.25 billion is allocated in this budget could be a canary in the coalmine.
Education
In 2022, Labor promised to spend $850 upgrading “at least” 89 schools.
Less than $13 million was allocated to 43 of those schools in last year’s budget.
Another $10 million was shared amongst the rest to start planning works.
The Deputy Premier and Education Minister Ben Carrol insists the remaining $827 million will be allocated by 2026 – but much of that may come closer to 2026 if the government needs to ease pressure in the short term.
Victoria’s Labor government will deliver its tenth budget on Tuesday.
‘COVID’ Programs
Everything from school tutors to solar panel rebates were listed as COVID-related expenses in Labor’s attempt to limit the impact of Victoria’s lockdowns.
Tim Pallas has flagged measures in health and education are on the chopping block.
More broadly, there are more than 370 government-supported programs which do not currently have funding guaranteed beyond June 30, 2024.
Infrastructure: Suburban Rail Loop East
Victoria signed a $3.6 billion dollar contract to begin digging tunnels on the first section of the $35 billion megaproject in December.
But how the state will afford to build the rest is murky at best.
Labor’s plan was to secure an even split between state funding, federal funding and “value capture” – which is essentially a tax on nearby businesses that stand to benefit.
We don’t know what that “tax” will look like yet.
Catherine King, the Commonwealth Infrastructure Minister, has also publicly said she wants to see a more detailed business case before contributing any more money to the project.
The Suburban Rail Loop will encircle most of Melbourne.
Airport Rail
On the opposite end of the scale, $10 billion is readily available to build Melbourne’s stalled Airport Rail Link.
Mediation is underway with Melbourne Airport demanding an underground station that the state government is unwilling to deliver.
The project will not be completed in 2029 as promised.
Taxes
An “Air BnB” tax will come into force in 2025.
The government hopes the 7.5 per cent levy will force homeowners out of the lucrative short-stay market and into longer-term rentals. Critics say owners will instead raise their prices and have dubbed the levy a “holiday tax”.
Changes to stamp duty have been mooted for years but the tax pocketed $8.7 billion for the state last financial year. Don’t expect any changes that will cost buyers less in the long term.
The Greens have been campaigning for a tax on bank profits but that would be better handled at a national level.
Victorian Premier Jacinta Allan.
Victorians have repeatedly been warned: this will be a tight budget.
What could and should be cut is a difficult call to make in the middle of a cost of living and family violence crisis, but state spending cannot continue at current rates forever.
Victoria’s nurses, police, paramedics and public servants are all fighting for better pay deals.
But with more than two years until the next election, Jacinta Allan and Tim Pallas can afford to upset a few voters on Tuesday.