‘Strain’ at the top as Victoria looks for ways to improve battered budget

New government charges, reducing diplomatic staff and offloading Melbourne’s wholesale fruit and vegetable market have all been quietly canvassed by the state government as Treasurer Tim Pallas looks for ways to stop Victoria sliding deeper into debt.

Ahead of the release of the Allan government’s mid-year financial report for the 2024-25 financial year, The Age has confirmed Treasury has considered a raft of measures to help offset an extra $1.5 billion promised to hospitals since May and further blowouts on the Metro Tunnel budget.

Sources say there is a “strained” relationship between the offices of Treasurer Tim Pallas and Premier Jacinta Allan over ways to reduce Victoria’s debt.Credit: Getty Images

Four government sources, speaking anonymously to detail confidential discussions, said budget repair had increasingly become a point of contention within the Allan government.

They said the relationship between the offices of Premier Jacinta Allan and Pallas had been “strained” as they negotiated the budget process and also the release of the government’s Economic Growth Statement by the end of 2024.

Ideas being floated by Pallas to senior government members to help bring down costs had included reducing staff at trade offices and introducing fees on licences and working with children checks, the sources said.

However, one of the sources said Allan’s office had opposed contentious proposals such as new fees, as the premier wants to avoid repeating the months of political pain that followed this year’s budget.

The Age also spoke to two industry sources – speaking on the condition of anonymity to discuss internal discussions – involved in consultation with the government about the coming economic growth statement.

One of those sources said that document outlined changes such as streamlining the number of regulators in Victoria, reducing the number of business licences and improving the environment effects statement process for major projects, such as for renewables.

Pallas promised the environment effects statement at the last budget to find new ways to encourage business activity and grow the economy. The government maintains by growing the economy it can gradually reduce the state’s debt burden.

As part of the environment statement, the government is also considering lifting the waste-to-energy cap, which currently limits the amount of waste that can be burnt to $1 million tonnes a year, the industry source said.

Melbourne’s wholesale food and produce market in Epping.Credit: Justin McManus

Both industry sources also confirmed the government had floated the idea of selling off the public-owned Melbourne Market, the 67-hectare fruit and vegetable wholesaler in Epping.

The market – the land, buildings and equipment – is valued at $486 million, according to the Melbourne Market Authority’s most recent annual report.

In 2021, consultancy group PwC performed an independent valuation on behalf of the Valuer-General Victoria to determine “fair value” for the land and buildings.

Agriculture Minister Ros Spence last month denied speculation the government was considering selling the market after the opposition suggested it would be open to selling it to wholesalers.

One of the industry sources told The Age that Treasury staff had been investigating the sale, but talks cooled in the middle of the year when the government appeared to walk away from the plan.

Late on Monday, a government spokesperson said there were “no plans to sell Melbourne Market”.

But the government has not ruled out other options, such as a long-term lease.

Victoria is the only mainland state that retains direct government management of its wholesale fresh produce market.

Talk of the sell-off comes as wholesalers on Monday stepped up their fight against the government, calling for the Melbourne Market Authority’s chief executive and board to stand down after the authority announced a rent increase of more than 100 per cent over the next decade.

The May budget – which included the relocation of the Arden health precinct and delays to projects such as the Upfield train line level crossing removal program – triggered a protracted dispute over reining in hospital funding.

That ultimately ended when the government committed an extra $1.5 billion to the sector for 2024-25, after which Pallas admitted he was a “little bit unhappy” about having to find the money on short notice and had told ministers to reduce spending.

“We’re committed to preserving our fiscal targets and our fiscal strategy, so that will essentially mean that the government’s going to have to make further adjustments in terms of our budgetary settings,” Pallas said at the time.

On Monday, Allan said her government was driving down debt by growing the economy and remained focused on budget discipline it touted in May.

“We'll continue to make those sensible and disciplined decisions in the context of that fiscal strategy,” she said.

“We’ll also soon be releasing an economic growth statement, and that economic growth statement will be firmly focused on jobs.”

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