Labor MPs told to cut wish lists, avoid infrastructure in budget bids

Labor MPs have been told to halve the number of funding requests for their local communities and not seek any financial support for infrastructure projects in preparation for another difficult Victorian budget.

Members of the Labor caucus have been told they can only make budget pitches for five things in their electorate for next year’s cycle, down from the usual 10.

Treasurer Tim Pallas.Credit: Joe Armao

Project requests have been capped at $500,000 and cannot include local infrastructure.

The Age spoke to five MPs, asking to speak anonymously to avoid repercussion, who said the request had come as a surprise because it was hoped the 2024-25 budget, which Treasurer Tim Pallas marketed as “responsible and disciplined”, would contain the last of the bad news before a positive shift heading into the 2026 election.

However, they agreed that other election commitments would still give them local projects to spruik in their areas.

Net debt is expected to peak at $187.8 billion for the Victorian government by the middle of 2028 – equivalent to about one-quarter of the state economy.

Economist Saul Eslake.Credit: Alex Ellinghausen

Economist Saul Eslake said the Victorian government still needed to spend less money or find more revenue from taxes.

“Arguably, excessive infrastructure spending is one of the main reasons why Victoria is in the financial mess it is,” he said.

“Cutting a few things off [their list of projects] would be better, but not adding to it is at least a step in the right direction.

“Victoria now has, by quite a margin, the highest payroll tax rate in the country.”

Labor MPs have been told not to make budget pitches for infrastructure projects.Credit: Eamon Gallagher

Eslake said the government’s latest financial report showed the state’s finances were “slightly less worse” than forecast in May, but were “in no sense good”.

He said a $411 million improvement to the state’s operating balance was entirely attributed to higher grants from the Commonwealth than expected, which were not guaranteed to repeat.

“It certainly isn’t a reason for expecting the results for the current financial year to be any better than projected in the May budget,” Eslake said.

Budget bids are usually lodged over summer in preparation for discussions in the new year about what will be possible for each year’s budget.

A state government spokesperson said the May 2025 budget would deliver for Victorians.

“We’ve always invested in the things that matter to Victorian families – building more homes, health, education and transport. Or next budget will be no different,” the spokesperson said.

In the last budget, the Allan government sought to rein in spending by pushing back the timeline of some projects, moving a hospital precinct at Arden to Parkville and moving to a new funding structure with the state’s health services.

However, the funding changes sparked a war with public hospitals that ended with the state pledging to add an extra $1.5 billion this financial year. This will be accounted for in the state’s mid-year financial report alongside a $840 million increase to the taxpayer burden for the Metro Tunnel.

The ban on government MPs pitching for budget funding for infrastructure in their local communities challenges Premier Jacinta Allan’s commitment to support more intensive residential development.

This week, Allan said the government had a track record for delivering infrastructure at the “really local level” by upgrading schools and kindergartens, green open space, dog parks and walking connections.

“We’ve invested in those smaller infrastructure projects, but no less meaningful projects for those communities. We want to continue that focus, and we’ll be having more to say about how, alongside building more homes, we’re going to continue that focus on building the infrastructure that make these communities a great place to live.”

The Victorian government this week announced it would trial a new infrastructure contribution scheme in its first 10 activity centres earmarked for housing density.

The levy will apply on new housing projects from 2027 while the government consults with industry over a universal charge that could be applied to all areas in Victoria that build new homes.

Major projects in Victoria’s Big Build have also been accused of cutting costs by outsourcing manufacturing contracts from overseas to limit costs in construction.

The use of foreign steel has previously been criticised on the West Gate Tunnel and in upgrades to GMHBA Stadium.

A union source said outsourcing steel from overseas was now commonplace on major transport and energy projects, with contractors using cost overruns to argue against local sourcing requirements. Another source said Victorian projects were increasingly relying on overseas contractors to cut costs, undermining commitments to keep business within the state.

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