Surging GST, stamp duty, insurance and motor vehicle tax revenues has enabled the Andrews Victorian government to announce funding for $22 billion in new capital projects while continuing to deliver surplus over the next four years.
The first tranche of capital spending will be focused on train and tram stock and removing railway level crossings in metro Melbourne and regional Victoria.
The biggest single project is a recommitment to the $11 billion Melbourne Metro Rail Project — including a new rail tunnel under the CBD. The funding includes $1.5 billion for planning over four years to enable construction to commence in 2018.
Announcing the previous government’s 2.5% cap on expenditure growth was not able to deliver the services required, the Victorian Treasurer Tim Pallas (pictured) — handing down the 2015-16 State Victorian Budget on Tuesday — said expenditure growth would be maintained at 3% across the forward estimates.
Pallas said average revenue growth was estimated to be 3.4%, which was predicted to see operating surpluses totalling $5.8 billion over four years.
The level of total tax revenue is expected to grow by 4.1% to $19 billion this coming financial year and to maintain a healthy growth of 3.9% over the next four years.
Victoria is also set to gain a windfall from the GST with State Treasury estimating growth of 7.5% in GST revenues, contributing to an overall average 3.8% growth in grant income from the Commonwealth.
The 3% increase in over all operational spending will see expenses increase to $54 billion for 2015-16.
The biggest increase in spending is in staffing which accounts for 42% of all operating expenditure. Staffing costs are expected to rise by 7.1% to $23 billion in 2015-16. These reflect promised pay rises to emergency services and nurses. Staffing costs are expected to grow at 3.4% on average across the next four years.
Net debt as a proportion of GSP is expected to rise to 5.8% by this June, then is budgeted to fall sharply off the back of proceeds from the lease of Port Melbourne.
According to the budget papers net debt as a proportion of GSP will be 4.4% by June 2018, compared with the previous prediction of 4.5%.
Treasury estimates continued strong growth of the back of lower interest rates and stronger export growth. Growth is forecast to rise to 2.5% in the coming financial year , up from 2.25% this year.
The Victorian labour market has improved since late 2014 and these gains are expected to be consolidated over the next 12 months with employment predicted to grow around the long term rate of 1.5%. Unemployment is expected to fall marginally to 6.25%, down from 6.5% this year.
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