2021 | Victorian Budget Summary
BUDGET OVERVIEW
Governments across the country are spending big to fuel economic recovery post-COVID but the Victorian Budget gives us a significant point of difference in how Labor vs Coalition Governments intend to pay for it
The Victorian Budget has unveiled massive increases in spending on health, mental health and schools as the Andrews Government forecasts the worst impacts of COVID-19 are finally behind them.
Victoria has already hit its 2022 jobs target, adding 200,000 jobs since November, with economic growth forecast to hit 6.5 per cent for the year ahead.
Treasurer Tim Pallas said the state’s economy was rapidly recovering, predicting things would return to pre‑COVID strength later this year.
But the business community is up in arms after Pallas unashamedly slugged big businesses he said had profited through the pandemic via taxpayer subsidies by instigating a new mental health levy to be delivered through a staged increase in payroll tax.
The changes would see a 0.5 per cent surcharge on payroll tax for businesses with wage bills exceeding $10 million, with an additional 0.5 per cent for those above $100 million.
All up, this is expected to drive an additional $3 billion into mental health services and comes off the back of the Royal Commission into Victoria’s Mental Health System that found existing services had catastrophically failed to live up to expectations.
The Government claims the levy will impact less than five per cent of employers but Business Council Australia chief executive Jennifer Westacott said the move sets a dangerous precedent for fiscal repair, with a further $2.4 billion for the budget bottom line set to be raised in property taxes.
The Government announced a $3.6 billion health package to upgrade emergency departments and fund more paramedics in a health system stretched to breaking point as Victorians endured by far the longest and most comprehensive restrictions of any Australian state at the height of the pandemic.
The State’s forward estimates now show a projected operating cash surplus of $1.1 billion for 2022‑23, with net debt expected to become $156.3 billion by June 2025, lower in each year of the forward estimates than was forecast in the 2020‑21 Budget.
Rating agencies welcomed the beginning of recovery but warned this had come at a cost, with the Victorian Government set to record a record deficit in 2021 and debt stock levels now forecast to be about three times historical levels.
"We believe there is a risk that a slower-than-expected vaccine roll-out leaves the state, budget, and national economy vulnerable to outbreaks and lockdowns, further delaying fiscal recovery," ratings agency S&P said.
In addition, closed international borders leading to lower population growth and limited numbers of international students, alongside a slowdown in trade and tourism are likely to hamper economic growth in the medium term.
KEY ANNOUNCEMENTS
Mental Health
$3.8 billion over four years to rebuild the system
3,000 additional mental health workers including doctors, nurses and allied health professionals
Focus on community-based care with 20 new local mental health services across the state
Health
$3.6 billion in hospital upgrades
$1.5 billion to continue fighting COVID-19
Education
$492 million for 13 new schools on Melbourne’s fringe
$401 million to provide kindergarten for three-year-olds and four-year-olds
$276.4 million to buy land for schools
Transport
$93.6 million for new trains to Melton and Wyndham Vale
$28 million to improve local neighbourhood planning due to increased numbers of people working from home
Environment
$517 million for bushfire risk reduction
$75 million for tree planting
$22 million for land management including Aboriginal cultural burning
Property
50 per cent reduction in stamp duty for inner-city apartments that have been on the market for 12 months or more
Tax holiday on vacant residential land doubled to two years for properties worth up to $1 million
Justice
$210 million to remove the backlog of court cases caused by the coronavirus pandemic
$43 million for new police stations
$40 million to fund a redress scheme for police who are victims of sexual harassment and assault at work
Regional Victoria
$19.9 million to help farmers adapt to climate change
$19.2 million for better boating facilities across the state
