Victoria envy of the nation after asset sales and austerity lead to $3.2bn in surpluses

RECORD budget surpluses soaring to nearly $3.2 billion will be announced today by the Victorian government.

RECORD budget surpluses soaring to nearly $3.2 billion will be announced today by the ­Victorian government, underpinned by a buoyant housing market, asset sales and austerity measures.

Treasurer Michael O’Brien will detail a stunning turnaround in the state’s finances a day after the government announced two major asset sales set to yield at least $6.2bn across the medium term.

The revised 2013-14 budget surplus will climb by more than $700 million to $935m, with the surplus jumping close to $1bn in 2015-16 to more than $3bn.

By 2016-17 the surplus will be forecast to hit nearly $3.2bn, levels not seen since the height of the Kennett government’s asset sales process, which in 1998-99 drove the surplus to $2.8bn.

The budget will leave the Napthine government as the economic success story in Australia as Canberra grapples with a classic “horror’’ budget and the states and territories struggle under the weight of deficits.

Mr O’Brien said yesterday the government, which axed thousands of public servants in budgets two and three of what it hopes is its first term, was anticipating a growing economy. “We are expecting the economy to strengthen over the next few years. I would expect to see employment strengthening in line with the economy,’’ he said. “We have been far more prudent with our expenditure growth.’’

The record surpluses came as Mr O’Brien announced at least $6.2bn in asset sales, including what the government expects will be more than $800m in bonus federal payments under the new “asset recycling’’ agenda. Mr O’Brien also announced the government would reap a net $400m from the sale of the state’s Rural Finance Corporation.

The sale to Bendigo and Adelaide Bank was worth more than $1.7bn but the state will first have to repay existing liabilities, leaving it with $400m from the sale plus an extra 15 per cent dividend from the federal government.

Mr O’Brien also announced that the Port of Melbourne would be offloaded under a 40-year lease arrangement, expected to reap more than $5bn. He refused to say how much the port might be worth on the open market.

He also believes the port sale will attract the commonwealth’s asset recycling bonus, which would be worth at least a further $750m to the Victorian government.

Joe Hockey did not say whether the two asset sales would qualify for the dividend.

The push to accelerate asset sales comes amid consideration of a potential $6bn sell-off of the Snowy Hydro scheme, which could be worth nearly $2bn for Victoria, which has a 29 per cent stake in the project.

Mr O’Brien claimed yesterday there were no plans to sell off the Victorian stake in the water scheme, although he said the same of the Port of Melbourne.

The sale of the RFC was not put to tender, raising questions from the opposition and the Victorian Farmers Federation.

It was sold to Bendigo as a private treaty based on advice from the private sector.

Opposition Leader Daniel Andrews said: “Who sells a $400m asset without going to tender?’’

Today’s budget will be based heavily on infrastructure, to enable the construction of the $20bn East West Link as well as providing the framework for the Melbourne Metro rail project.