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2015-16 VICTORIAN BUDGET BRIEFING NOTE

5 May 2015

At a glance

Operating surplus of $1.2 billion in 2015-16, rising to $1.8 billion by 2018-19 Increased expenditure by 0.5 per cent to provide funding for services $5.2 billion infrastructure investment with a further $16.1 billion across the forward estimates 6.25 per cent unemployment rate, dropping to 5.75 per cent in 2018-19 Key themes include jobs, schools, hospitals and transport

Budget in focus

Today Victorian Treasurer Tim Pallas handed down the Andrews Governments first Budget. The Budget largely delivers on the promises undertaken by Labor made during last Novembers election campaign and accounts for each initiative in their 2014 Financial Statement.

The Budget produces a $1.2 billion surplus, with accumulated surpluses of $5.8 billion across the forward estimates. This years surplus is lower than that forecast by the previous government; however, Labor has said that their expenditure increase, from 2.5 per cent to 3 per cent, will be used to provide additional funds for education and health services.

The theme of this years Budget is For Families. In his speech, the Treasurer described the Budget as getting back to basics: jobs, schools, hospitals and transport.

Economic outlookVictorias economy is continuing to improve as the Australian economy moves from a reliance on mining investment to broader based drivers. Settings such as extremely low interest rates and rising asset prices are strengthening household budgets, which is improving consumer spending. However, this growth has come at a time when employee income has stalled and aggregate hours worked have flattened. Business investment is expected to grow moderately as consumer spending improves.

Employment continues to be of concern, although this is predicted to improve with a stable 1.5 per cent employment growth forecast over the forward estimates, a drop in unemployment to 5.75 per cent by 2018-19. Population is expected to remain high over the forecast period

The emphasis of this Budget on service delivery is linked to the strong reliance of the Victorian economy on human capital. Compared nationally, Victorias economy is uniquely dependent on industries which require high labour input as well as knowledge industries such as finance and professional services. The Budget argues that economic prosperity relies on policies that invest in people through services such as health and education.

Victorias Gross State Product (GSP) is expected to rise to 2.5 per cent in 2015-16 reflecting stronger consumer sentiment. International ratings agencies have confirmed Victorias triple-A credit rating, meaning that the Government is able to borrow at lower rates to fund items such as the states $5.2 billion infrastructure program.

Jobs

The Government has recommitted to its goal of creating 100,000 new jobs.

Their $100 million Back to Work scheme has been funded and will provide incentives for companies to hire unemployed young people, the long term unemployed and retrenched workers.

$508 million has been set aside for the Premiers Jobs and Investment Fund and is reserved for investment in strategic job creation initiatives.

$60 million from this fund is included for a start-up initiative to assist new companies with the development of business cases, intellectual property and patent advice and other new business assistance.

$200 million is committed to the establishment of the Future Industries Fund, offering grants of up to $1 million for companies working across the six sectors the Government has identified for extraordinary growth: medical technology and pharmaceuticals, new energy technology, food and fibre processing, transport, defence and construction technology, international education and professional services.

Transport

Transport was a key focus throughout last years election campaign; in particular the tension between competing projects the East West Link and Metro Rail. The Government has begun to deliver on its transport priorities.

$2 - $2.4 billion has been budgeted over the forward estimates, and a further $3.6 billion has been committed beyond this, to fund the removal of metropolitan level crossings.

$9 - $11 billion has been committed to the Melbourne Metro Rail Project.

$690 million will go towards the Governments Rolling Stock Strategy, to be spent on the manufacture and refurbishment of trains and trams, including five new XTrapolis trains to be built by Alstom.

$574 million will be spent on road construction and improvements; this includes $150 million for the next stage of the M80, $110 million to duplicate the Chandler Highway Bridge, $40 million for the first stage of the West Gate Distributor. Additionally $273 million has been provided towards the widening of the Tullamarine Freeway and $76 million for the delivery of 23 key freight corridor projects.

Education and schools

$2.9 billion has been committed to investment in education over four years. This will include upgrades to 67 schools and $111.1 million for 10 new schools across the state.

$400 million has been allocated across TAFE, Local Learning and Employment Networks and Tech School funds in order to deliver on the Governments commitment to skills and training.

Health and hospitals

$2.1 billion has been invested across the health budget. $560 million of this will be spent on the construction and renovation of hospitals including the Western Womens and Childrens Hospital, the Casey Hospital, the Werribee Mercy Hospital, the Angliss Hospital, the Ballarat Base Hospital and the Victorian Heart Hospital.

More information

The 2015-16 Victorian Budget papers are available online at http://www.budget.vic.gov.au.

For more information or advice please contact the CPR team.

Brendan RowswellSenior AdviserCPR Melbourne+61 3 9993 6412+61 402 916 952b.rowswell@cprcomm.com.au @BrendanRowswellChanmali TregambeSenior AdviserCPR Melbourne+61 3 9654 4799+61 488 440 058 c.tregambe@cprcomm.com.au @CPRComms

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