Victorian state election 2018: Pre-election budget reveals in-tact surpluses, despite stamp duty hit
THE slowing property market is expected to take a $2.4 billion hammer to the State Budget, but strong population growth will fill the void through other taxes likely to be collected.
Victoria State Election
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A SLOWING property market is expected to take a $2.4 billion hammer to the State Budget, but strong population growth will fill the void through other taxes likely to be collected.
A pre-election Budget update released by the Department of Treasury and Finance today also shows policies announced by the Andrews Government since May are worth $876 million over four years.
And forecasts of employee wages have been dialled up once more, with an extra $562 million added to the bottom line in the past six months.
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Despite the loss of stamp duty tax revenue — forecast to be $2.4 billion over four years — Labor’s forecast surpluses of almost $10 billion over four years are intact.
This is because land tax revenue is forecast to soar by an extra $909 million extra over four years, while other taxes such as GST ($1.7 billion) and payroll taxes ($275 million) fuelled by strong population growth have also been revised up.
Gambling taxes have also soared because of the sale of a new lottery licences that came into effect in July.
Treasury Secretary David Martine said the property market slowdown is one of the big risk factors affecting state finances.
“On the downside, the moderation in the residential property market could prove deeper
than currently factored into the forecasts, particularly if prompted by tighter access to
credit, rising borrowing costs or a general economic downturn,” the update says.
“A weaker housing market could lead to softer household sentiment, lower consumption and dwelling investment, and slower growth in employment, wages and real GSP.”
But Treasurer Tim Pallas said today that the projections were a “very conservative approach” and that there was no need to consider delaying or paring back the government’s big infrastructure spend.
“The worst thing any government could do, in circumstances where there is uncertainty as to the future, is to lead the market down and to essentially wind back our investments,” he said.
“Capital expenditure is one things that governments have at their disposal in terms of their timing.
“Are there options available to governments in circumstances where a further deterioration in the market would occur? Yes, there are but I don’t think there’s any reason why we should even contemplate them at the moment."
Stamp duty was expected to pour almost $7.07 billion into government coffers this year, but since May that has been revised down to $6.46 billion.
Infrastructure spending is expected to be strong, with an average of $10.6 billion being spent every year.
To pay for that, the government has borrowed more money.
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Debt is expected to be 6 per cent by mid-2022, or about $31.8 billion. It is currently $22.5 billion.
But Mr Pallas played down the rise, saying debt in “absolute terms” had grown as the economy had boomed.
“The Victorian economy has grown by $50 billion over the time that this government has been in office,” he said.
“That means almost one in seven dollars circulating the Victorian economy today didn’t exist four years ago.
“Almost one in 10 jobs that exist in the Victorian economy did exist four years ago.”
The Budget update says employee expenses including superannuation are forecast to grow by 7.2 per cent this year which “reflects increases in the public sector workforce”.
“The increase in employee expenses also reflects changes in average remuneration levels
through enterprise bargaining agreements,” it says.
Sticking to the Coalition’s campaign mantra that the government has “lost control”, shadow treasurer Michael O’Brien said Victorians would “pay the price”.
“This pre-election budget update shows you what a difference four years makes - taxes are up, debt is up, public sector beaucrat wages are up at the executive levels,” he said.
“This is not something that Victorians can afford.”
Mr O'Brien said the government had built its budget on a “house of cards” — the cooling property market.
“They have been relying on a hot property market to pay for their promises and that hot property market has come to a screaming halt,” he said.
“You’ll note that we have not been as over-the-top as Daniel Andrews has been in what we have been promising.”
Opposition leader Matthew Guy said the government was addicted to raising taxes.
He said the cooling property market would be an excuse for Labor to raise taxes if they were to win government again on November 24.
“As sure as the sun comes up Daniel Andrews is going to increase taxes on everything, from cars, to rego, to stamp duty on the family home, on everything,” he said.
He said the coalition will not raise taxes but instead try to keep it down.
Earlier, Premier Daniel Andrews refused three times to speak on the budget update, saying he would leave it to the Treasurer.
But before the report was released he did talk up the Victorian economy, despite fears a sluggish property market would impact the government’s stamp duty returns.
“Our budget is in surplus each and every year.”
“Our economy as ComSec reported last week is the strongest in the nation.
“The real question is what would or economy be like if we didn’t get on and build the infrastructure we are talking about.”
The state’s Financial Management Act requires the government to pull back the curtains on its budget position in the lead-up to an election.
“The purpose of this Pre-Election Budget Update is to update information on the general
government sector since the 2018-19 Budget was published in May 2018,” the report says.
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