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Victorian Budget

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Victorian Budget

Victorian Budget

2010-11 Overview

Standing up for families securing jobs.

The Secretary

    Department of Treasury and Finance 1 Treasury Place

    Melbourne Victoria 3002

    Australia

    Telephone: +61 3 9651 5111

    Facsimile: +61 3 9651 5298

    Website: www.budget.vic.gov.au

    Authorised by the Victorian Government 1 Treasury Place, Melbourne, 3002. Printed by Stream Solutions,

    Level 3, 157 Spring Street, Melbourne, 3000.

    This publication makes reference to the 2010-11 Budget Paper set which includes: Budget Paper No. 1 Treasurer’s Speech

    Budget Paper No. 2 Strategy and Outlook

    Budget Paper No. 3 Service Delivery

    Budget Paper No. 4 Statement of Finances (incorporating Quarterly Financial Report No. 3) Victorian Budget Overview

    ? Copyright State of Victoria 2010

    This book is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968. ISSN 1440-6969

    Published May 2010.

    Printed on recycled paper.

    Rectangular stadium photo: Peter Glenane Royal Women’s Hospital photo: John Gollings

    Photography

    2010-2011 Victorian Budget Overview 1

Contents

     Treasurer’s message 3

     More jobs and a resilient, competitive Victorian economy 4

     Putting Patients First 10

     Promoting community safety 13

    More support and services for children and families 15

     Investing in our schools 16

     A budget for all Victorians 18

     Maintaining Victoria’s liveability 22

     A Fairer Victoria 24

     Delivering the Victorian Transport Plan 26

     New support and investment for regional Victoria 27

     Sustainability and the environment 29

     Bushfire reconstruction and recovery 31

    2010-2011 Victorian Budget Overview 2

Treasurer’s Message

    The Brumby Labor Government’s active leadership has enabled Victoria to weather the global financial crisis and create close to 100 000 new jobs in the past year. The 2010 Budget secures up to 30 000 jobs in 2010-11, and invests in the vital services and infrastructure that have made Victoria one of the best places in the world to live, work and raise a family. Last year’s State Budget was delivered in the middle of the global financial crisis and at the beginning of

    Victoria’s long recovery from the devastating bushfires of February 2009. Despite these difficult conditions, the Brumby Labor Government has met its commitment to secure jobs and maintain our economy’s resilience

    during the global downturn.

    Close to 100 000 jobs have been created in Victoria in the last year the highest jobs growth of any Australian

    state demonstrating the effectiveness of the Government’s decisive response to the global financial crisis

    and the success of our approach of investing in job-securing infrastructure and taking direct action to build a more diverse, competitive and productive economy.

    While the outlook remains uncertain and the repercussions from the global downturn continue to affect our economy and budget, Victorians can be confident that our state is well placed to take advantage of a global recovery and continue to support jobs growth. The Government’s sound financial management – combined

    with active planning and investment for the future also means we can continue to provide the high standard

    of services and infrastructure that underpin the lifestyles valued by Victorians.

    The resilience of Victoria’s economy is reflected in forecast economic growth of 3.25 per cent in 2010-11,

    although growth is expected to remain relatively soft in 2009-10 due to the lingering effects of the global financial crisis. Despite losing tax and GST revenue as a result of the downturn and substantial investment

    in bushfire recovery our budget position remains sound.

    The Brumby Labor Government has maintained Victoria’s AAA credit rating and will deliver a surplus of $872 million in 2010-11, with surpluses averaging $1.2 billion over the following three years. Keeping the budget in surplus enables us to invest in the infrastructure Victoria will require to support people, families and communities in need, such as the Regional Rail Link and new hospitals.

    The 2010 Budget continues the Brumby Labor Government’s significant and ongoing infrastructure program,

    providing $9.5 billion in 2010-11 to deliver capital projects that, when combined with other significant works underway in Victoria, will secure around 30 000 jobs. The budget supports:

     major water projects with the Government having taken the tough decisions to build a desalination plant and upgrade our water grid to secure Victoria’s water supply, the budget continues to fund these and other statewide water projects;

     major hospital projects, including the new Bendigo Hospital, the Box Hill Hospital redevelopment, the new Parkville Comprehensive Cancer Centre and Putting Patients First reforms agreed with the Commonwealth

    Government;

     the completion of this tranche of the Victorian Schools Plan, which has now funded the rebuilding or modernisation of 553 government schools across the State exceeding the Government’s 2006 election

    commitment; and

     the new Regional Rail Link, which will deliver very substantial benefits to both Melbourne and regional Victoria allowing services from Bendigo, Ballarat and Geelong to run express into Melbourne, as well as increasing capacity on Melbourne’s northern and western suburban train lines.

    The Brumby Labor Government has progressively increased investment in the state’s health system, to give

    Victorians access to the best and latest in health care, but the costs of and demand for health services are rising. The 2010 Budget further boosts the capacity of our public hospitals to treat more patients each year, expand vital hospital services and upgrade hospitals in regional Victoria.

    Overall, this year’s budget provides a record $4 billion investment in Victoria’s health system, in partnership with the Commonwealth.

    While there has been an overall decline in Victoria’s crime rate, the Government shares the community’s concern about street violence and drunken and anti-social behaviour. To enforce tough new laws on street crime and support stronger police powers, this year’s budget provides investment in 1 966 more frontline

    2010-2011 Victorian Budget Overview 3

police, the biggest boost to frontline police in Victoria’s history.

    The Brumby Labor Government’s sustained commitment to, and investment in, regional Victoria is reflected in much stronger regional economies, more jobs in regional areas, more people moving to our regions and the overwhelming success of the Regional First Home Bonus. The 2010 Budget delivers major new regional health and transport projects, ahead of further investment provided through the Blueprint for Regional Victoria, to be released by 30 June this year.

    The budget also funds new actions to protect the lifestyles of Victorian families, help growing communities plan for the future, manage important and valuable natural landscapes, and maintain the liveability and amenity of our cities, suburbs and towns.

    The results over the past year are proof that the Brumby Labor Government’s approach has worked. The 2010 Budget continues the Government’s commitment to the core values of sound financial management, investment in infrastructure and direct action to secure jobs and support business activity values that

    successfully guided the Government’s leadership during the global downturn, and that will continue to ensure Victoria’s prosperity and liveability in the years ahead.

John Lenders MP

    Treasurer

    2010-2011 Victorian Budget Overview 4

    More jobs and a resilient, competitive Victorian economy

    The Brumby Labor Government’s action and leadership have been critical to the resilience of the Victorian economy in weathering the global financial crisis and to Victoria emerging as Australia’s ‘engine room’ for jobs growth.

    Active, prudent leadership during the global downturn

    The Victorian economy in 2010 Since coming to office, the Government has steered the State’s economy

    effectively and responsibly, and has continued to do so during the recent Resilience and economic growth global financial crisis. Over the last 10 years, the Government focused on Growth in GSP is recovering but is still a reform agenda to build a more diverse, competitive and innovative state expected to be below-trend in 2009-10 economy. This enabled the Government to respond quickly and effectively due to the lingering effects of the GFC. to the economic downturn, working in partnership with the Commonwealth Growth is likely to strengthen and Government to invest in infrastructure projects, services, skills and broaden in 2010-11 to 3.25 per cent. innovation to support jobs and business confidence. Jobs growth Over the year to March The Government’s prudent financial management and active reform 2010, employment in Victoria grew by agenda enabled Victoria to remain resilient during the global downturn, 3.8 per cent, creating almost 100 000 provided the capacity for a significant program of infrastructure investment jobs, the highest of all Australian states. to secure jobs, and ensured that Victoria is now well placed to take Consumer confidence Consumer advantage of a global economic recovery. confidence and household spending have A resilient economy and active government leadership have meant that increased, underpinned by a recovery in Victoria has been able to avoid significant tax increases in the face of the wealth and strong population growth. global financial crisis. Victoria is also one of only two jurisdictions in The Victorian population grew by 2.2 per Australia to abolish all of the taxes and duties required under the GST cent over 2008-09, but growth is agreement with the Commonwealth, in an environment where other states expected to ease over the next four have delayed the abolition of these taxes. years.

    The Brumby Labor Government is committed to ongoing taxation reform to Housing investment Dwelling approvals improve economic competitiveness and growth. The Government looks have been at record levels in Victoria, far forward to working with the Commonwealth Government in responding to the exceeding levels in other states. This Review of Australia’s Future Tax System, while also ensuring Victoria’s partly reflects the improved targeting and financial independence and growing the economy. effectiveness of the Victorian

    Government’s First Home Bonus. Managing ongoing challenges Business investment and confidence Despite improving global economic conditions, the outlook continues to be Conditions have been challenging for uncertain. While prospects for Victoria’s economic growth have been business investment, especially due to revised upwards, the impacts of the global financial crisis continue to be tighter lending conditions. However, felt domestically. Aggregate GST and tax revenue is over $3 billion lower business conditions and confidence have than forecast prior to the global financial crisis. Sustaining investment in improved over the past year. infrastructure and services in the face of this shortfall, creates significant Pressure on the Australian dollar The and ongoing challenges for managing the State’s finances. strong performance of the Australian The global economy is also recovering at different speeds, with some of economy compared with other countries Victoria’s major trading partners growing strongly, while others have and the revival of the resources boom weaker prospects. Over the coming year, the Victorian Government will has put upward pressure on the continue to pursue an active reform agenda to sustain the State’s exchange rate, posing a major challenge economic resilience and competitiveness, and to support stronger growth for Victoria’s traditional industries and in private sector activity. The Government remains committed to: exporters.

     a strong, sustainable financial position for Victoria as the foundation for facing future economic challenges, consistent with maintaining the State’s AAA credit rating;

     substantial budget operating surpluses to help fund investment in vital infrastructure and create a strong budget position; and

     ongoing action to secure jobs and support business activity, including delivery of a substantial infrastructure program.

    2010-2011 Victorian Budget Overview 5

    These commitments are core values that the Government considers essential to sustaining a strong economy. The 2010 Budget reinforces these commitments, delivering an ongoing program of economic reform, while ensuring that Victoria is well prepared for future uncertainties.

    Securing more jobs for Victorians

    The Brumby Labor Government’s decision to maintain high levels of

    investment in infrastructure during the global financial crisis has been

    highly successful in securing jobs for Victorians.

    Close to 100 000 new jobs have been created in Victoria since March

    2009, making Victoria the engine room of Australia’s jobs growth –

    no other state comes close.

    In the last 12 months, Victoria has recorded the fastest employment

    growth of any Australian state, accounting for almost half of all new

    jobs created in Australia in this period. Victoria also had the highest

    full-time jobs growth of any Australian state.

    Alongside investment in infrastructure, a key plank of the

    Government’s reform agenda has been investing in education and

    training to improve the skills of Victoria’s workforce. The Government

    significantly increased education and training opportunities for Victorians during the downturn, and has worked hard to assist people

    return to the workforce and to re-train. This means that Victorians are ready to take on new challenges and meet the skills needs of business and industry as the economy recovers.

    The 2010 Budget will continue to secure Victorian jobs through the substantial investment program underway in Victoria. The infrastructure program will also have the added benefit of enhancing the ongoing economic capacity of the State and improving longer term productivity growth. This infrastructure program is estimated to secure around 30 000 jobs in 2010-11.

    Delivering an ongoing, substantial infrastructure investment program

    A key driver of the Victorian economy’s resilience has been the Government’s ongoing delivery of the largest infrastructure program in Victoria’s history – a program that is designed to provide high quality public

    infrastructure for all Victorians, support jobs and ensure that future generations of Victorians have access to vital infrastructure. The 2010 Budget continues this program of responsible infrastructure investment and delivery.

    In 2010-11, net infrastructure investment will total $9.5 billion, then average $7.7 billion per annum over the three years to 2013-14.

    State Government will deliver large scale, statewide plans such as the Victorian Transport Plan and projects such as the Regional Rail Link, the Parkville Comprehensive Cancer Centre and the Wonthaggi Desalination Plant, as well as new and upgraded hospitals, roads and schools.

    Victorian economic projections (%)

    2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

    Actual Forecast Forecast Forecast Forecast Forecast

    Real gross state 0.8 2.25 3.25 3.00 3.00 3.00

    product

    Employment 0.2 2.25 2.00 1.75 1.75 1.75

    Unemployment rate 5.1 5.50 5.50 5.25 5.25 5.25

    Consumer price index 2.8 1.75 2.25 2.50 2.50 2.50

    Wage price index 4.0 3.00 3.25 3.50 3.50 3.50

    2010-2011 Victorian Budget Overview 6

Population 2.2 2.10 1.90 1.80 1.70 1.70

    Sources: Australian Bureau of Statistics; Department of Treasury and Finance

Victoria’s infrastructure partnership with the Commonwealth

    In February 2009, the Commonwealth Government launched the , which included: Nation Building Economic Stimulus Plan

     $2.6 billion to deliver new infrastructure for government primary schools and special schools, and science and language centres

    in secondary schools, as well as minor refurbishments or small-scale infrastructure projects; and

     $1.3 billion to provide more than 4 500 new social housing dwellings and deliver improvements to existing social housing

    dwellings.

    To date, Victoria has contracted projects to the value of $1.8 billion as part of . More than 1 090 Building the Education Revolution

    contracts have been or are about to be awarded for the Primary Schools for the 21st Century program, with 160 primary school projects due for completion by the end of May 2010.

    Science and language centres and National School Pride programs are progressing well with 96 per cent of National School Pride funds expended by schools.

    In addition, 300 social housing dwellings have been completed and 2 900 are underway. Social housing projects funded through the

    Nation Building and Jobs Plan are on track to be completed by 2012.

     Consolidating Victoria’s competitive business environment

    The Brumby Labor Government is recognised as a national leader in promoting a competitive economy by providing efficient and effective regulation.

    Reducing red tape and business costs

    The Government’s action to reduce red tape has resulted in a net reduction in business costs of approximately $246

    million per annum, based on current initiatives. In September 2009, the Government adopted an even more ambitious red tape reduction target of $500 million per annum by July 2012. This revised target will further boost productivity by driving down costs for Victorian businesses.

    Victoria has also been at the forefront of action to reduce the burden of

    regulation for businesses operating across state borders. The 2010 Budget

    includes Victoria’s final instalment of the $100 million facilitation funding

    provided nationally by the Commonwealth to deliver the Seamless National

    Economy program signed by the Council of Australian Governments (COAG)

    in late 2008.

    Over the last seven years, the Labor Government has delivered cuts to

    WorkCover premiums, generating savings to thousands of Victorian

    employers this year is no different. WorkCover premiums will be cut by a

    further 3.5 per cent, saving employers around $60 million in 2010-11 and

    2010-2011 Victorian Budget Overview 7

    bringing total accumulated cuts to 40 per cent over seven years. The average premium rate will drop to an historic low of 1.34 per cent from 1 July 2010, close to that of the lowest state, Queensland (1.30 per cent). These cuts are the result of the successful management of the WorkCover scheme and action to improve workplace safety the

    most effective way to reduce premiums being to reduce the rate of workplace injuries.

    Taxation reform

    The Brumby Labor Government views taxation reform as essential to building a competitive business environment and attracting new investment and jobs to Victoria. Tax cuts worth around $5.7 billion have been announced since 1999, including significant reductions in business taxes. The Government believed it was more responsible to invest in infrastructure and jobs during the economic downturn than to cut taxes. However, with the global outlook slowly improving, the 2010 Budget returns to the Government’s taxation reform agenda.

    The tax measures in this budget provide for a $223 million total cut to business taxes and costs over four years aimed at driving greater competitiveness and supporting the creation of jobs. Costing $193 million over four years, this budget announces a 0.05 percentage point reduction to the Victorian payroll tax rate, effective from 1 July 2010. This cut is the seventh cut announced by this government and means that the payroll tax rate has dropped to 4.9 per cent down from the 5.75 per cent rate of the previous government. Around 31 000 businesses will benefit from this reduction, which brings the Victorian payroll tax rate to the lowest it has been since 1975 and the second lowest

    rate of any state.

    To provide an incentive for private operators to develop residential aged care facilities and retirement villages, this budget announces a two year extension to the current land tax exemption for these facilities to include the construction phase (see page 9).

    Backing our businesses and industries

    The Government has provided strong support for Victorian businesses and industries to remain flexible, innovative and competitive during the economic downturn. The 2010 Budget continues this support, including: $27 million over five years for new tourism campaigns;

     $4.4 million for new infrastructure at Melbourne’s Docklands Studios;

    • $18 million in 2010-11 to acquire land to meet car parking needs associated with a future expansion of the Melbourne Exhibition Centre;

     $11 million over two years to commence the Truck Action Plan, which will improve access to the Port of Melbourne while reducing trucks in residential streets;

     $16 million over four years for the Transition to a Global Future initiative to help Victorian businesses to capture new opportunities emerging in the global economy, including support for Victorian businesses affected by the rising Australian dollar;

     $12 million over four years for the Start and Run a Successful Small Business initiative; and $175 million over five years to secure jobs and business opportunities through the

    Jobs for the Future Economy statement.

    Skills for a strong economy

    A skilled labour force is critical to business growth, productivity and

    competitiveness. Through the Securing Jobs for Your Future Skills for

    Victoria reforms (announced in 2008), the Government is building a more

    flexible vocational education and training system that can respond faster

    to the changing needs of Victorian businesses. Alongside these reforms,

    the 2010 Budget provides$55 million over three years to improve facilities

    and equipment at TAFE institutes.

    The Government continues to support young Victorians undertaking

    apprenticeships and traineeships, providing $32 million over four years to

    continue the apprentice/trainee completion bonus and to support

    apprentices who study away from home.

    2010-2011 Victorian Budget Overview 8

Sound financial management

    The global financial crisis has had a significant impact on Victoria’s finances. The Brumby Labor Government’s disciplined financial management underpins a strong budget position, giving the State the capacity to invest for the future, secure jobs, weather uncertain economic times and provide vital services and infrastructure for all Victorians.

     Budget surplus In 2010-11, the Government will again meet its budget surplus target of at least $100 million, delivering a net result from transactions for the general government sector of $872 million. Over the following three years, surpluses will average $1.2 billion.

     Today’s surplus is tomorrow’s infrastructure and much of these budget surpluses are already committed. For example, in the last two years of the forward estimates, two thirds of the surpluses are already committed to the strategically important Regional Rail Link project.

     Revenue Revenue from state taxation and GST weakened considerably in 2008-09. While taxation and GST

    revenue has recovered from 2009-10, consistent with the improved economic outlook and the strength of the property market, this revenue is still over $3 billion lower in aggregate than was expected prior to the global

    financial crisis.

     General government sector revenue is estimated to increase by 4.6 per cent to

    $45.8 billion in 2010-11 relative to the revised estimate for 2009-10. This mainly reflects an increase in taxation

    revenue and GST grants of 5.8 per cent and 9.8 per cent respectively, partially offset by a 1.8 per cent decrease in non-GST grants, mainly reflecting the planned wind back of Nation Building Economic Stimulus Plan

    payments from the Commonwealth. The higher GST revenue reflects an increase in the GST national pool, and an increased share of this pool, following the Commonwealth Treasurer’s acceptance of the recommendations from the Commonwealth Grants Commission’s Report on GST Revenue Sharing Relativities 2010 Review, in

    February 2010.

     Expenses and service delivery Total expenses from transactions for the general government sector are expected to increase by 3.5 per cent to $44.9 billion in 2010-11, relative to the revised estimate for 2009-10.

     This mainly reflects:

     - New policy announcements made in this budget to meet high priority community needs;

     - Increased non cash depreciation expenses resulting from asset revaluations; and

     - An upwards revision of grant expenses for first home owners.

     AAA rating The value of net debt, both as a percentage of the Victorian economy and in nominal dollars is projected to be lower than in the 2009-10 Budget. In this Budget, net debt as a percentage of gross state product, in the last year of the forward estimates, is one percentage point lower than forecast in the May 2009 Budget. The Brumby Labor Government’s firm management of underlying expenditure and maintenance of borrowings at sustainable levels have protected the State’s AAA credit rating, and will support business and consumer

    confidence, private investment and

    jobs growth.

    Victoria’s AAA credit rating was reaffirmed by Moody’s Investors Service in January 2009 and Standard & Poor’s in September 2009.

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