The budget underpins the extent of the damage caused by the hotel quarantine debacle in Victoria. It’s Frydenberg’s problem to inherit and an undeniable handbrake on the national economy, wiping two percentage points off GDP growth in the September quarter.
The number is terrible and one that Daniel Andrews cannot escape. Victoria sneezed and now the rest of the country has an economic virus.
Frydenberg and Scott Morrison have been building up to this point for weeks, subtlety (mostly) pointing out that the economic headwinds have been unnecessarily strong because of Victoria’s second wave.
This positioning has been deliberate as Treasury has reported a collapse in the national economy and arguably the worst business conditions in a century. As Victoria shows continuing signs of being on top of the coronavirus, attention will turn to two political imperatives. The first is safely reopening the economy and returning life to the 2020 version of normality.
The second, and probably the most important, is controlling unemployment and keeping the number in 2021 as much below double figures as is possible.
Building roads and rail will not resolve the disruptive impact of the virus. In reality there is no big-bang solution for Victoria in this budget.
As much as a modest enough lift in infrastructure spending will help pockets of the state, it won’t suddenly fix the chasm that is tourism, hospitality and international education.
Like NSW, the public and private sectors already have poured more than $100bn into the economy in recent years.
If anything, the big challenges in both states will be dealing with capacity constraints brought on by the already hectic flow of projects that are under way.
In Melbourne CBD, for example, the $12bn underground city rail development is in full swing and the West Gate tunnel project well under way.
Add to this the $10bn-plus railway crossing removal projects and a lot is going on.
It is clear Daniel Andrews will announce tens of billions of dollars more of infrastructure projects in the looming state budget, possibly including the $10bn airport rail link, a huge northeastern road link and a cross city underground rail project.
This is where Andrews sees his political future. A massive infrastructure spend to try to paper over the coronavirus debacle.
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When Josh Frydenberg walked into the House of Representatives on Tuesday night his chief problem was seven hours’ drive down the Hume.