Inside the push to steal – and keep – Victoria’s businesses

In the boardrooms of Melbourne, two separate influence operations are fighting a cold war outside the public eye.

On the one side, interstate operatives from South Australia, Queensland and abroad are covertly working to turn Victorian businesses into defectors.

Gather Round in South Australia is one way the state government is competing with its rivals. Credit: AFL Photos

On the other side are those in the private office of Premier Jacinta Allan, who have sought to prevent itchy feet and unlock an economic boom that could pay down the state’s debt.

It’s a game of cat and mouse that Allan is alive to, with her office now working to redefine their relationship with the private sector through a new policy document: an economic growth statement focused on tax reform, growing new types of industry and cutting red tape.

The strategy has been welcomed by business. But after years of tax hikes and significant state debt, they remain wary.

As Australia’s second-biggest economy, Victoria has massive competitive advantages over other jurisdictions and leads heavily in areas such as medical research and major events.

But recent overtures by the Malinauskas government and other states are taking the fight to Victoria, capitalising on business sentiment during difficult economic conditions.

Honi Walker, chief executive of the South East Melbourne Manufacturers Alliance, said states like Queensland and South Australia were throwing business incentives at Victoria to lure their talent over their border, appearing at major industry events and directly targeting local companies.

She says taxes are the biggest constraint on her members, citing WorkCover premiums that had in some cases doubled and “crippling” hikes to land tax.

“The south-east region here is now the largest manufacturing hub in Australia. But we’re in danger of losing that if this government continues to increase taxes, payroll tax, stamp duty and land tax,” Walker said.

Dandenong’s factories have helped Melbourne’s south-east become a manufacturing powerhouse. Credit: Louise Trerise

“Anecdotally, many members are saying we’re going to have to choose whether we can employ any more people, whether we close up for good, or we move interstate or offshore,” she said.

The South Australian government has picked up on this sentiment.

An advertising blitz was plastered on billboards across Melbourne’s CBD, citing cheaper taxes and claiming that “business is better in SA”. The state hasn’t been shy in criticising Victoria’s ban on natural gas connections to new homes, a policy South Australian Treasurer Stephen Mullighan this year said “makes no sense”.

But it is behind the scenes where the Malinauskas government has been most effective.

Aouth Australian Premier Peter Malinauskas with LIV boss Greg Norman.Credit: Asanka Ratnayake/Getty Images

AFL sources have privately remarked on how hard South Australia has worked to drive tourism and major events to the state – one of Victoria’s biggest strengths.

Its investment has helped cement Gather Round – where every team plays in South Australia over a weekend – as a major staple of the AFL season. Government funds have also lured the Saudi-backed LIV Golf tournament to Adelaide.

LIV Golf boss and Australian star Greg Norman was last month glowing of Premier Peter Malinauskas, describing him as a friend and “the most humble person I’ve met in politics”.

Outside of sport, Seeley International in March revealed it was shutting down its Albury plant and relocating operations to Adelaide. One industry source said this was assisted by the South Australian government, which provided incentives to help the move.

Managing director Jon Seeley accused the Victorian government of an “anti-gas obsession” when announcing the decision.

“Government policy and government attitude towards employment towards manufacturers specifically seem to be much more positive in South Australia at the moment,” he says.

A month after Seeley’s announcement, Energy Minister Lily D’Ambrosio told an industry breakfast that gas had a role in Victoria’s energy transition and there were some sectors “who simply need to continue using gas for the foreseeable future”.

The comments were noticed by those in attendance because D’Ambrosio is a vocal advocate for electrification of homes and the architect of the state’s Gas Substitution Road Map.

She argues the government’s policy hasn’t changed, but multiple state government sources said there was a clear shift in the state’s rhetoric this year, following consultation with business.

One source said this dated as far back as March, when the Victorian Chamber of Commerce held an energy-focused lunch attended by industry and state government representatives.

At the time, VCCI chief executive Paul Guerra urged attendees to “call out the bullshit and call out the ideology”, warning businesses would leave if Victoria couldn’t keep an open mind on ensuring the energy transition did not hurt affordability or reliability.

Speaking to this masthead since those comments, Guerra says he’s seen a “lot of talk” about businesses leaving but disputes perceptions that Victoria was a more difficult place to do business.

Victorian Chamber of Commerce and Industry boss Paul Guerra and Treasurer Tim Pallas. Credit: Joe Armao

He adds a caveat: “If there’d been taxes applied to businesses in this budget, you would have seen businesses leave en masse.”

New taxes that have drawn the ire of the private sector while Labor has been in power include the windfall gains tax, the mental health and wellbeing surcharge and a temporary expansion of land tax to pay off debts incurred during COVID.

Australian Bureau of Statistics figures show 3085 Victorian businesses have moved interstate between January 2022 and March 2024, the most of any jurisdiction. Over the same period, Queensland added 4276 and South Australia added 745.

Since 2021, Victoria has created 90,000 new businesses. According to the government, there has been a 13 per cent surge in business investment in the past calendar year.

Guerra says Victoria was not just competing with states like South Australia, but other countries who could offer significant incentives to move.

“Money is portable, it’s going to find the best opportunity and where we need to drive Victoria to is to be that best opportunity globally,” he says.

But Guerra says he’s noticed a change in approach since Allan came to power.

“We had a good relationship with the previous government, but it was more down to individual ministers,” he said. “Whereas this time around, there’s a willingness from Jacinta down to engage.

Premier Jacinta Allan has been more willing to engage with businesses, VCCI chief Paul Guerra says.Credit: Joe Armao

“What we’ve been positioning with the premier, the treasurer and deputy premier, as well as key ministers, is the only way you can go forward is by engaging and leveraging the private sector.

“Because they know how to draw down on the superannuation money, they know how to get the change that we need, without impacting Victoria’s balance sheet.”

Victoria’s net debt is forecast to hit $179.2 billion by the end of the 2026-27 financial year.

Since coming to power, Allan’s approach has reminded some industry figures of premiers Steve Bracks and John Brumby, who were well known for their cordial relationships with the private sector. Central to this in her office is Mounir Kiwan, director of parliament and stakeholders.

Although the government’s signature housing statement was delivered under Daniel Andrews, Allan was involved in the process; when she became premier, she pointed to it as an example of the collaborative approach she would bring to leadership.

Government staff say this strategy has been evident through the state’s commitment to spur housing development, and through its rejection of a safe injecting room in the CBD opposed by businesses.

Cath Evans, Victorian executive director at the Property Council of Australia, said the Allan government had recognised addressing the housing crisis required working with industry, but it was yet to be seen whether this consultation would lead to tangible reforms.

“The next six months are critical to see the successful implementation of the housing statement and reforms that lessen the immense tax burden experienced by the Victorian property industry,” Evans said.

Allan’s business-friendly mantra will also hinge on the government’s next big policy document, the economic growth statement.

Government insiders have likened this document to the housing statement in that it will aim to detail multiple generational reforms and be largely driven by private sector ideas. Guerra will lead an advisory committee informing its contents.

Through this process, the Allan government has promised to examine tax reform, grow fledgling industries and overhaul regulation and planning for businesses in Victoria.

Infrastructure Partnerships Australia chief executive Adrian Dwyer said he believed the document would be a “substantive fiscal event” and was an indication the government was preparing the ground for “bold decisions about investment and reform”.

Pallas says the statement will focus on growing household incomes, pointing to changes to the payroll tax-free threshold and the phasing out of stamp duty for commercial and industrial properties as evidence of the government’s willingness to cut red tape.

“We’ve always been clear gas has a role to play in Victoria’s energy transition – but we’re helping households switch to electric appliances and supporting business that can electrify, to do so – helping Victorians save on their bills and preserving gas supply for important use in businesses, manufacturing and power generation.”

One business eager to grow in Victoria is Swoop Aero – one of the state’s start-up success stories. Headquartered in Port Melbourne, it has been delivering medical items in Africa by drone since 2020 and operates across multiple continents.

Co-founder and chief executive Erick Peck said they’d been targeted to bring their operations overseas and interstate, often with significant financial benefits. He said a major drawcard was Victoria’s university sector, which educated the talent they needed.

Swoop Aero co-founder Eric Peck wants to run a global logistics service for 100 million people by 2025.Credit: Tash Sorensen

Peck said stability was the best thing for a business, but currently the market was geared more towards poaching companies than retention.

“The system is leveraged towards us moving to get money, instead of being incentivised to stay.”

Peck said one thing that would benefit businesses like his would be further payroll tax exemptions tied directly to the creation of new jobs.

Shadow Treasurer Brad Rowswell said the government’s financial management was pushing business away.

“I say to Victorian businesses who are finding it hard to survive under the pressure of Labor’s taxes: stick with us, Labor won’t always be in charge.”

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