Victorian budget: Public sector wage bill to lift 21pc

Victoria’s public sector wages bill is forecast to jump 21 per cent over the budget forward estimates.

Victorian Treasurer Tim Pallas. Picture: David Caird

Victoria’s public sector wages bill is forecast to jump 21 per cent over the budget forward estimates, ­increasing by $2.9bn this financial year before rising by $3.5bn to $37bn by 2024.

Public sector employee ­expenses, which are the state government’s largest expense, are predicted to rise by 9.5 per cent this financial year, and will be at least $2bn higher annually than forecast in last year’s budget.

However, the government has deferred plans to impose almost $2bn in efficiencies across the state public sector, citing the need to respond to the pandemic and focus on economic recovery.

Annual wages growth in Victoria is predicted to be just 1 per cent this financial year, rising to 1.75 per cent during 2021-22 and 2 per cent in the 12 months to June 2023.

The budget papers show government employee expenses, ­including superannuation, are forecast to grow from $30.69bn in July 2020 to $33.6bn by mid-2021.

The wages bill for the 2020-21 financial year is now forecast to be $2.4bn higher than forecast in last year’s budget.

Government employee expenses are forecast to increase to $34.33bn by June 2022, rising to $35.8bn 12 months later and $37.1bn by June 2024.

Treasury said the average ­annual 3.4 per cent rise in employee expenses over the forward estimates reflected the government’s response to the pandemic, increased service delivery, ­primarily in health and education, and pay rises flowing from enterprise agreements.

Community and Public Sector Union Victorian secretary Karen Batt endorsed state Labor’s economic strategy.

“It’s the right budget for the right times,” she said. “Not only has the government acted to stimulate private investment and jobs, it has acted as a responsible employer and invested in its ­service delivery and its people.”

The unemployment rate is forecast to peak at 8.25 per cent at the end of 2020 before falling to 7.75 per cent in June next year and 7 per cent 12 months later.

Employment will slump by 3.25 per cent this financial year ­before rebounding to 3.5 per cent in 2021-22, and 2.25 per cent in 2022-23.

Treasury said the nature of the pandemic meant that the economic forecasts were subject to a much higher degree of uncertainty than usual.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said the government had delivered a “once in a century budget for a once in a century pandemic”.

“This is a high-spending budget with a focus on infrastructure and jobs that will help the Victorian economy recover quickly and place it in a good position to take advantage of emerging ­opportunities in a post-COVID world,” he said.

He said the budget was underpinned by an “incredible level of spending and borrowing, which is necessary but only up to a point that does not risk Victoria’s prized AAA credit rating”. “With so many projects under way and planned, delivery risk now looms large,” he said. “We will look to the government to partner with the private sector to deliver projects on time, and that means creating an environment that is conducive to business, with less regulation, less cost, more skilled, job-ready workers, and more university-industry connections.”