It seems like a tough, but not cruel, budget as the Victorian government seeks to bring down its record debt, which was accumulated during the height of the Covid pandemic, while still fulfilling its election promises.
In a conversation with multicultural media last night, Assistant Treasurer Danny Pearson stated that it is “a responsible budget that continues to invest in jobs and projects that contribute to the development of our state and focuses on what matters.” He emphasized that it delivers on the commitment made to the electorate six months ago, with investments in hospitals, schools, roads, and railways that will benefit Victoria in the next 10, 20, and 30 years.
When the Covid pandemic struck, Pearson highlighted that the government took swift action to safeguard health and the economy, resulting in a borrowing of $31.5 billion to preserve jobs and save lives.
He further added that this budget incorporates a targeted and responsible repayment plan, structured in a manner that aligns with people’s ability to pay.
While the budget affects large businesses, efforts have been made to ease the burden on small businesses that endured the challenges of the 276-day lockdown. A 10-year Covid debt levy has been implemented to assist in repaying the government’s unprecedented borrowing during the pandemic.
Support for small business
The government has also introduced relief measures such as employer insurance and expanded protections against the burdensome payroll tax.
“This budget funds every election commitment we made, and we can do this because our commitment is strong and the first step in our fiscal strategy is for jobs, and we delivered that in spades,” said Pearson.
Over the course of the next ten years, Victoria has made the decision to gradually eliminate business insurance duty, presenting a favourable financial relief to enterprises operating within the state. The government’s estimations indicate that businesses can expect to accumulate savings of approximately $3,200 on professional indemnity insurance and $2,400 on fire and other special risk insurance during this decade-long span.
Pearson said that “the tax-free threshold for payroll tax will also be lifted from $700,000 to $900,000, benefiting 4,200 businesses.
“Around 6,000 businesses who otherwise would have paid payroll tax will no longer pay and more than 26,000 businesses or around 60 percent of payroll tax paying businesses will benefit.”
Another 22,000 businesses will pay a reduced amount of payroll tax. From 1 July 2025, the payroll tax-free threshold will increase again to $1 million.
Starting July 1, businesses with a national payroll exceeding $10 million annually will face an augmented payroll tax, incurring an extra financial burden. Enterprises falling within this category will be subjected to a rate of 0.5 percent on their national payroll that surpasses $10 million. Furthermore, businesses with a national payroll surpassing $100 million will be required to pay an additional 0.5 percent.
These supplementary rates will be applicable solely to the portion of wages that falls above the respective threshold within Victoria. As a result, it is estimated that these measures will generate a substantial sum of $3.9 billion in revenue.
Public service jobs to go
Up to 4,000 jobs will be cut from the Victorian public sector, but no frontline workers such as nurses or teachers will be targeted.
“The unemployment rate is below 4 percent, as it has been for the past year, which hasn’t happened for nearly fifty years,” Pearson said.
The government wants to draw back the state’s public service to pre-pandemic levels and anticipates a $3.6 billion in savings.
Pearson highlighted that the Labor government had increased public service jobs during Covid, and that support and retraining would be provided.
“The government has added almost 440,000 jobs, with four out of five of these being full time positions.”
In the current positive labour market, he believed that it would not be difficult for those who leave public service to land a job.
“Our budget creates jobs, and restores economic growth, and we will reach a cash surplus, will deliver a high cash surplus in 2022 – 2023 predicted in the pre-election budget update of $2.9 billion.”
The assistant treasurer, said that the government has forecast “an operating surplus of $1 billion in 25 to 26 and $1.2 billion in 26 to 27.”
Free kinder and better schools and training
Pearson pointed to $170 million for the TAFE Fund, to provide four TAFE projects and establish the TAFE Clean Energy Fund to improve lifelong education pathways, workforce skills and capacity. The government will provide $1.4 billion for its free kindergarten program and $1.6 billion for its new three-year-old kindergarten scheme.
The government will also spend $618 million to erect nine new schools in metropolitan Melbourne.
“It is a plan for the very best start in the welfare of kids, and a plan to help Victorians with the rising cost of living.
“There is $266 million across 43 schools to deliver high quality classrooms and facilities and another $24 million for school upgrades for 54 schools and $235 million to transform the lives of students living with disability”
According to Pearson, the government has committed to injecting a considerable sum of $320 million into health infrastructure initiatives encompassing various projects.
These endeavours include the establishment of a new emergency department at Queen Elizabeth II hospital situated in the eastern suburbs, as well as the construction of a new hospital in the West Gippsland region.
Such investments are set to enhance the healthcare infrastructure and services available in these areas, ensuring improved access to medical facilities for residents.
“The budget has allocated $9 billion in our healthcare system, and this includes $320 million for hospitals infrastructure, to upgrade hospitals including commitments and to upgrade facilities to be patient ready and to provide for eight more PET scanners across Victoria.”
He said $286 million will be invested in women’s health, including $65 million for debilitating endometriosis, $58 million for 20 new women’s health and a dedicated Aboriginal-led women’s clinic.
Land tax to increase and elite private schools hit
From January 2024, Victorians who currently pay land tax will be hit with an additional annual fee of $500 for landholdings worth between $50,000 and $100,000 and $975 for land worth between $100,000 and $300,000. For land valued at more than $300,000, the $975 fee plus an additional hike of 0.1 percent will be added. Family homes will remain exempt from land tax.
Pearson said that only about 860,000 Victorian landowners will be impacted on and will pay “around of $1,300 in additional taxes.”
Land values increased by around 84 percent in the past decade and rents have also increased by 25 percent over the last five years.
Clearly those with multiple properties are being asked to “make a small contribution to repaying Covid debt.”
He added that the increases will have a sunset clause and end after 10 years.
From July 2024, high-fee private schools will no longer be exempt from payroll tax, which will raise $422.2 million over three years. This may affect 110 of the state’s most exclusive schools.
Curate’s egg on road infrastructure
On the road infrastructure front, the M80 Ring Road Upgrade, slated for completion within the first quarter of this year, now lacks a specified timeframe and lacks allocated funds over the foreseeable future.
The North East Link, planned for completion during the last three months of 2028, also lacks a completion date and designated funds.
On a positive note, the West Gate Tunnel project, aimed at providing an alternative to the West Gate Bridge, remains on schedule for completion by the conclusion of 2025.
Likewise, the Metro Tunnel project is still on track to be finalised during the final three months of 2025. Regrettably, both the Geelong Fast Rail and Airport Rail projects do not have estimated completion dates.
Any delay in the Geelong Fast Rail project will consequently postpone the electrification of trains in Melbourne’s western region.
Key points of budget
- $1 billion to bring back the State Electricity Commission (SEC), re establishing government owned energy and investing in renewables.
- $694 million for a road blitz to upgrade key roads and intersections to improve network efficiency, travel times and road safety.
- $650 million to upgrade the Melton Line, giving commuters in Melbourne’s West better train services.
- $601 million to buy 23 more VLocity trains to be manufactured in Victoria.
- $450 million to support the delivery of new and upgraded low fee Independent and Catholic schools.
- $400 million to deliver another round of the $250 Power Saving Bonus.
- $320 million to plan the delivery of major investments at seven hospitals across the state.
- $266 million to upgrade 43 government schools across Victoria.
- $235 million to support students with disability and their families, including expanding the Outside School Hours Care program.
- $201 million for new and upgraded community sport and recreation facilities.
- $190 million to make regional public transport fares fair across Victoria, capping the cost at the metro rate.
- $186 million to expand eligibility for VET subsidies, so more Victorians can get the training they need for the jobs they want in high demand industries.
- $170 million for the Building Better TAFE Fund, which provides four TAFE projects and establishes the TAFE Clean Energy Fund..
- $167 million to provide support for more nurses and midwives..
- $154 million for women’s health, including 20 new comprehensive women’s health clinics at public hospitals.
- $91 million to continue the work towards 50 local mental health services and keep delivering other community-based services.
- $62 million to deliver better local roads and safety upgrades for motorists, pedestrians and cyclists.
- $46 million to train the next generation of paramedics and introduce specialist paramedic practitioners.