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2015-16 Victorian State Budget
5 May 2015
 
Delivering his first Budget as Treasurer of the Andrews’ Government, Tim Pallas has ensured that Victoria continues to set the benchmark for delivering strong budget surpluses, AAA rated finances and much needed expenditure on productive assets. The Treasurer today confirmed that the Victorian Government will increase the level of state expenditure growth to 3 per cent in order to fund specific election commitments early in their term of Government, whilst at the same time strongly investing in improved social services such as education and health. The Budget also provided further clarity on significant infrastructure projects announced prior to the Budget.
 
The theme of the Government’s 2015-16 Victorian Budget, “For Families”, recognises that a successful Budget package needs to combine both big ticket infrastructure commitments in public transport and roads with community initiatives in health and education. This strategy has seen Treasurer Pallas move away from a single budget centrepiece, instead delivering targeted measures across the Victorian economy.
 
This budget effectively reduces the projected surplus of the former Coalition Government from $2.2 billion to a more modest yet substantial $1.2 billion for the next financial year, growing to $1.8 billion by 2018-19. The Treasurer has signalled that Labor is prepared to “do things differently” when it comes to managing the balance between spending and growing surpluses, where the revenue side has received unexpected gains from increased property taxes and via dividends from Victorian public entities.
 
Stabilised Budget surpluses are predicted in an environment of modest economic growth, where net debt to gross state product (GSP) is forecast to fall from 5.5 per cent in June 2015 to 4.4 per cent in June 2019, maintaining the Victorian Government’s AAA credit rating
 
The Budget also emphasises a reduction in unemployment from 6.5 per cent in 2015-16 to 5.75 per cent in 2018-19 and includes the election commitment of $508 million for a Jobs and Investment Panel to allocate funding for areas of jobs growth of 100,000 new jobs in four years.
 
Medium to small infrastructure programs have received funding across the State to create activity in the construction industry within this Budget. In particular, a total of $730 million has been allocated across the forward estimates to restore dilapidated school buildings, including money to purchase land in growth areas for future schools. $350 million will be spent on TAFE, including reopening closed TAFE campuses. $560 million is allocated to building and rebuilding hospitals in growth corridors. Indeed, population growth has been acknowledged as a particular budget priority over the next four years.
 
The Budget confirms how the Government will progress major infrastructure projects, including:
 
  • The announcement of $1.5 billion in funding for the Melbourne Metro Rail Project to cover all anticipated planning, design and significant early work ahead of major construction of the Project to begin in 2018.
  • $2-$2.4 billion over the next four years to begin the process of 50 level crossing removals.
  • A payment of $339.8 million to the East West Connect consortium to settle and therefore not proceed with East West Link.
  • The CityLink Tulla Widening Project gets the go-ahead, with the Victorian Government providing $72.8 million and the Australian Government providing $200 million to the $1.3 billion project due for completion in 2018.
  • $600 million to build new E-Class trams, build 21 new V/Line trains and refresh the existing Comeng fleet and B-Class trams.
  • $210 million to expand the Melbourne Convention and Exhibition Centre by way of a stage-two expansion.
  • $110 million to duplicate the Chandler Highway bridge over the Yarra River near Fairfield.
 
The Budget also provides funding for rural and regional Victoria through health, education and jobs funding specifically for these regional communities. These communities will receive funding for a further 450 country firefighters, as well as $33.5 million for 70 new CFA trucks. Ballarat will receive $10 million for an urgent cardiac catheterisation laboratory at Ballarat Base Hospital. Gippsland, Bendigo, Geelong and Ballarat will each receive a new Tech school for vocational studies.
 
The Premier and Treasurer also reconfirmed their intention to enter into a medium-term lease over the operations of the Port of Melbourne.


IN BRIEF
  • The Budget has committed to $22 billion in new asset initiatives (infrastructure), while delivering a budget surplus of $1.2 billion for 2015-16, growing to $1.8 billion in 2018-19. This is lower than the surplus delivered by the former Government in its 2014-15 budget of $1.3 billion, and its forecasted rise to $3.3 billion in 2017-18. They key infrastructure initiatives include:
    • $1.5 billion over for years to finalise the planning and survey stage, and to start building the Melbourne Metro rail project by 2018. This project reverts back to its original alignment (revised from last year’s Budget announcement) and includes a tunnel under the CBD and five new CBD stations.
    • $2 billion to be spent on new tram and train rolling stock for both metropolitan trams and rail as well as regional rail.
    • $2.4 billion over four years to remove level crossings, a considerable acceleration from last year’s Budget, and a move towards the election commitment of removing 50 in eight years.
  • The Budget also focuses on education spending, with $3.9 billion over four years earmarked for meeting the Gonski obligations, upgrading school infrastructure, and assisting disadvantaged students.
  • The Budget also included a $560 million increase in health spending to upgrade hospitals across Victoria, including $85 million to GRACosway client Werribee Mercy Hospital to fund a critical care unit, six operating theatres and 56 inpatient beds. It also includes $200 million over 4 years to reopen currently closed hospital beds, and $59 million to cut waiting times in emergency departments.
  • Net debt to gross state product (GSP) is projected to decrease to 4.4 per cent by June 2019.  This is roughly in-line with last year’s Budget forecast, but lower than 4.5 per cent published in the 2014 Pre-Election Budget Update.
  • The Budget also focuses on one of the largest currently unfunded liabilities, the State’s unfunded superannuation liability, claiming it will fully funded by 2035. This combined with the decrease in net debt will lead to reduction in net financial liabilities as a proportion of GSP from 16.4 per cent in June 2015 to 12.1 per cent by June 2015.
 
KEY PARAMETERS
  • A budget operating surplus of $1.2 billion in 2015-16.
  • Victoria’s net debt will remain at 4.4 per cent of GSP in 2015-16, holding at that level to 2018-19.
  • Economic growth as measured by real GSP is forecast to be 2.5 per cent in 2015-16, and 2.75 per cent over the remainder of the forward estimates.
  • Budget estimates expenditure growth of 3 per cent on average per year. Forecast revenue growth remains at 3.4 per cent.
  • Unemployment is expected to remain steady at 6.25 per cent for 2015-16. It is anticipated to then fall over the forward estimates.
 
KEY SPENDING INITIATIVES
 
Key spending initiatives from the 2015-16 State Budget fall into a number of key areas, including suburban growth, rural and regional Victoria, with a major focus on education, health and infrastructure investment.
 
These initiatives are targeted towards the Labor Government’s election commitment of demonstrating investment in economic management and improved services in health and education across the State. These initiatives emphasise infrastructure in the short and medium term and increasing skills among Victorians as the economy transitions.
 
Public Transport Infrastructure Initiatives
  • Total government public transport infrastructure program of up to $22 billion, with a focus on 5 key projects.
  • Commitment to launch Trains, Trams, Jobs 2015-2025 – Victorian Rolling Stock Strategy, through a $2 billion investment. The Strategy sets out a ten-year public transport expansion plan including;
    • $1.3 billion for 37 new High Capacity Metro Trains
    • $274 million for 20 E-Class Trams
    • $257 million for 21 VLocity Carriages
    • $90 million for five New X’Trapolis Trains
    • $75 million for maintenance and refurbishment to extend the life of the current Comeng train fleet
    • $21 million to extend the life of the B-Class Tram fleet
  • $2.4 billion committed to remove level crossings over the next four years as part of the Government’s plan to remove 50 over eight years.
  • Commitment to begin the Melbourne Metro Rail Project through a $1.5 billion 4 year investment. The funding covers all anticipated planning, design and early works ahead of major construction of the Project in 2018.
  • The previously announced CityLink Tullamarine Widening Project has been confirmed. The Australian Government and the Victorian Government will contribute $200 million and $73 million respectively.
  • $574 million to upgrade Victoria’s congested roads.
  Suburban Growth Initiatives
  • $2.9 billion education initiative, with a focus on;
    • $688 million for 10 new and 67 renovated and refurbished schools in suburban and regional areas. Including $42 million to conduct a state-wide school asbestos removal program.
    • $350 million to be spent on the TAFE system; reopen closed buildings, upgrade workshops
  • $2.1 billion committed to the health system, with a focus on;
    • $560 million to build and rebuild hospitals in suburban and regional areas across Victoria.
    • $200 million to increase hospital capacity in line with the Travis Review
    • $118 million to treat and support people with mental illness
    • $85 million to expand the Werribee Mercy Hospital, including 6 operating theatres
  • $508 million for the Premier’s Jobs and Investment Fund to provide investment and advice.
  • $257 million committed to Victoria’s child protection system.
  • $226 million towards increasing police presence to keep the Victorian community safe.
  • $200 million for the Target One Million Plan to increase recreational fishing numbers.
  Rural and Regional Victoria Initiatives
  • $500 million invested in the Regional Jobs and Infrastructure Fund.
  • $117 million to upgrade 21 regional schools.
  • $80 million to bring major events; sport, cultural, social to regional Victoria and Melbourne.
  FURTHER READING
About GRACosway
GRACosway is Australia's leading public affairs and corporate and financial communications counsel. Our integrated suite of services provides public policy, communications, regulatory, issues management, and media relations advice to a range of domestic and international clients across all industry sectors. From offices in Sydney, Melbourne, Brisbane, Adelaide, Canberra, and Perth (through GRA Everingham), GRACosway's clients benefit from the combined experience, expertise, and strategic perspective of our team in addressing complex and commercially sensitive projects. For more information head to gracosway.com.au
 
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