Victorian Budget 2014|15 · Victorian Budget 2014|15 Unit of measure 2013‐14 Revised 2014‐15 Budget 2015‐16 Estimate 2016‐17 Estimate 2017‐18 Estimate Net result from transactions

Victorian Budget 2014|15

David MartineSecretary, Department of Treasury and Finance

7 May 2014


Unit of measure

2013‐14 Revised

2014‐15 Budget

2015‐16 Estimate

2016‐17 Estimate

2017‐18 Estimate

Net result from transactions $ billion 0.9 1.3 3.0 3.2 3.3

Net debt $ billion 21.5 23.4 18.5 19.0 19.5

Net debt to GSP per cent 6.1 6.3 4.7 4.6 4.5

Government infrastructure investment $ billion 5.2 7.5 7.1 6.4 6.4

Real GSP growth per cent 2.00 2.50 2.75 2.75 2.75

Employment growth per cent 0.75 1.25 1.50 1.50 1.50

Unemployment rate per cent 6.25 6.25 6.00 5.75 5.50

Population growth per cent 1.8 1.8 1.8 1.8 1.8

2014‐15 Budget economic and fiscal aggregates

Source: Department of Treasury and Finance


‐2

‐1

0

1

2

3

4

GDP Consumption MiningInvestment

Non‐MiningInvestment

DwellingInvestment

Public Demand Exports Imports

percen

tage points

2012 2013

Contributions to national economic growth

Source: Australia Bureau of Statistics, Department of Treasury and Finance


0

25

50

75

100

1998‐99 2000‐01 2002‐03 2004‐05 2006‐07 2008‐09 2010‐11 2012‐13 2014‐15

$ billion

Actual and expected business investment by sector*

Mining Non‐mining

National mining investment peaked in 2012‐13

Source: Australia Bureau of Statistics, Department of Treasury and Finance *Dotted lines indicate expected capital spending adjusted for average realisation ratios


‐2

0

2

4

6

8

10

12

14

Dec‐1986 Dec‐1989 Dec‐1992 Dec‐1995 Dec‐1998 Dec‐2001 Dec‐2004 Dec‐2007 Dec‐2010 Dec‐2013

per cen

t

Household savings ratio 5 year average (savings)

Structural shift in household savings

Source: Australian Bureau of Statistics


0

1

2

3

4

5

6

Tasmania New South Wales South Australia Victoria Queensland Western Australia

per cen

t

10‐year average GSP growth rates

Average of non‐mining states

Victoria has the strongest economy of the non‐mining states



‐40

‐20

0

20

40

60

80

Private consumption Dwelling & OTC* Business investment Public demand Net trade Balancing item

per cen

t

Victoria Mining statesSource: Australia Bureau of Statistics, Department of Treasury and Finance

Components of the Victorian economy in 2012‐13

*OTC = Ownership transfer costs


0

1

2

3

4

5

6

7

8

Feb‐2008 Feb‐2009 Feb‐2010 Feb‐2011 Feb‐2012 Feb‐2013 Feb‐2014

per cen

t

Victorian annual retail trade growth

Source: Australian Bureau of Statistics (trend data)


0

1,000

2,000

3,000

4,000

5,000

6,000

Mar‐2008 Mar‐2009 Mar‐2010 Mar‐2011 Mar‐2012 Mar‐2013 Mar‐2014

numbe

r per m

onth

Dwelling approvals

Source: Australian Bureau of Statistics (trend data)

VIC

WA

Qld

NSW

ROA


0 2 4 6 8 10 12 14 16 18

Mining

Electricity, Gas, Water & Waste Services

Public administration and safety

Construction

Health care and social assistance

Manufacturing

Professional, Scientific & Technical Services

Financial & Insurance Services

Selected Victorian industry gross value added as a share of nominal GSP

2012‐13 1992‐93

per cent

Our reliance on manufacturing has declined…



‐7.5

‐5.0

‐2.5

0.0

2.5Agriculture, forestry and fishing

Mining

Manufacturing

Electricity, gas, water and wasteservices

Construction

Wholesale trade

Retail trade

Accommodation and food services

Transport, postal and warehousingInformation media andtelecommunications

Financial and insurance services

Rental, hiring and real estateservices

Professional, scientific andtechnical services

Administrative and supportservices

Public administration and safety

Education and training

Health care and social assistance

Arts and recreation services

Other services

Ownership of dwellings

Victorian deviationfrom national average

Deviation of Victorian industry gross value added share from national share (percentage points)

…and our industrial structure is diverse



29.2

29.2

17.7

12.0

9.9

9.8

9.3

8.4

0 5 10 15 20 25 30

ACT(Public administration and safety)

WA(Mining)

NT(Construction)

NSW(Financial and insurance services)

TAS(Health care and social assistance)

Victoria(Financial and insurance services)

QLD(Construction)

SA(Health care and social assistance)

Largest industry ‐ gross value added as a share of nominal GSP

We are less vulnerable to external shocks


per cent


80

100

120

140

160

180

200

1990‐91 1992‐93 1994‐95 1996‐97 1998‐99 2000‐01 2002‐03 2004‐05 2006‐07 2008‐09 2010‐11 2012‐13

Inde

x 1990

‐91 = 100

Victoria Australia

Victorian and national terms of trade



0

2

4

6

8

10

Victoria NSW Queensland WA SA Tasmania

$ billion

Value of food and fibre exports (2012‐13)

Food Fibre

Leader in agricultural exports

Source: Department of Environment and Primary Industries


+5.2+4.9

+0.7‐0.7 ‐1.1 ‐1.3

‐2.9

‐4.8

‐6

‐4

‐2

0

2

4

6

Victoria NSW ACT NT SA Tasmania WA Queensland

percen

tage points

2012‐13

Share of national education exports less population share



56

58

60

62

64

66

68

70

Tasmania SA NSW Victoria Queensland WA

per cen

t

Trend labour force participation rate – March 2014

Average of non‐mining states

Highest participation of the non‐mining states



‐100

‐50

0

50

100

150

200

250

300

Manufacturing Mining Utilities Agriculture,Forestry &Fishing

HouseholdServices

Construction GoodsDistribution

BusinessServices

thou

sand

s

Change in employment: February 2004 – February 2014

Victorian employment change by industry



0

20

40

60

80

100

Victoria Australia

per cen

t

Share of economic growth 2007‐08 to 2012‐13*

Low capital intensive industries** High capital intensive industries**

Victorian growth driven by low capital intensive industries

Source: Australian Bureau of Statistics; Department of Treasury and Finance

*Excludes ownership of dwellings**Categorised based on industry capital intensity relative to manufacturing as a baseline.

Capital intensity is defined as capital stock over hours worked


‐4000

‐2000

0

2000

4000

6000

8000

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Sep‐07 Sep‐08 Sep‐09 Sep‐10 Sep‐11 Sep‐12 Sep‐13 Sep‐08 Sep‐09 Sep‐10 Sep‐11 Sep‐12 Sep‐13

PersonsPer cen

t

Annual population growth Annual net interstate migration

A growing population


Victoria

Australia

Victoria


Victoria’s population >8 million by 2050

>1 million new dwellings by 2050

2011‐12: 28m (Melb. Airport)Doubling over the next 20 years

2012: 12.5m daily person trips2050: 20.5m daily person trips 2031: 440,000 daily person trips,

up 38% on current levels.

2012: 2.6m container units 2050: >11m container units

2012: 15 billion tonne kilometres2046: 33 billion tonne kilometres

Driving demand for infrastructure and services

Plan MelbourneTransport

Train Trips

2031: 1.7m daily person trips per weekday, double current patronage

Air Passengers

East‐West Road Travel

Freight

Port Container Trade


Financial measures Parameters

Operating surplus A net operating surplus of at least $100 million and consistent with the infrastructure and debt parameters

Net debt General government net debt reduced as a percentage of GSP over the decade to 2022

Infrastructure investment Infrastructure investment of 1.3 per cent of GSP (calculated as a rolling five‐year average)

Superannuation liabilities Fully fund the unfunded superannuation liability by 2035

Medium‐term fiscal strategy



0

3

6

9

12

15

2000‐01 2002‐03 2004‐05 2006‐07 2008‐09 2010‐11 2012‐13 2014‐15 2016‐17

per cen

tAnnual revenue growth



0.85

0.90

0.95

1.00

1.05

1.10

2009‐10 2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

Relativ

ity

Distribution of GST revenue

Victoria

Queensland

New South Wales



0

3

6

9

12

15

2000‐01 2002‐03 2004‐05 2006‐07 2008‐09 2010‐11 2012‐13 2014‐15 2016‐17

per cen

tAnnual expenditure growth



Victoria general government revenue and expenses


12.0

12.5

13.0

13.5

14.0

14.5

15.0

1999‐00 2001‐02 2003‐04 2005‐06 2007‐08 2009‐10 2011‐12 2013‐14 2015‐16 2017‐18

percen

tage of G

SP

Revenue Expenses


21

22

23

24

25

26

27

1999‐00 2001‐02 2003‐04 2005‐06 2007‐08 2009‐10 2011‐12 2013‐14 2015‐16 2017‐18

percen

tage of G

DP

Receipts Payments

Commonwealth government receipts and payments

Source: Commonwealth Mid-Year Economic and Fiscal Outlook


0

2

4

6

8

10

12

14

16

18

1989‐90 1991‐92 1993‐94 1995‐96 1997‐98 1999‐00 2001‐02 2003‐04 2005‐06 2007‐08 2009‐10 2011‐12 2013‐14 2015‐16 2017‐18

per cen

t of G

SPGeneral government sector net debt to GSP



State Standard & Poor’s Moody’s

Credit rating Outlook Credit rating Outlook

Victoria AAA Stable Aaa Stable

New South Wales AAA Negative Aaa Stable

Queensland AA+ Stable Aa1 Negative

Western Australia AA+ Stable Aaa Negative

South Australia AA Stable Aa1 Stable

Tasmania AA+ Stable Aa1 Negative

Northern Territory N/A N/A Aa1 Negative

Australian Capital Territory AAA Stable N/A N/A


Strongest credit rating among the States


0

1

2

3

4

5

6

7

1999‐2000 2001‐02 2003‐04 2005‐06 2007‐08 2009‐10 2011‐12 2013‐14 2015‐16 to2017‐18

$ billion

Cash funded infrastructure investment Debt funded infrastructure investment

Residual cash to repay debt Net infrastructure investment

2015‐16 to 2017‐18 average

Net infrastructure investment



• Partnership between Commonwealth and Victorian Governments to deliver significant projects for Victoria

• Victorians will benefit from incentive payments through divestment of the:

‐ Port of Melbourne (via medium‐term lease)

‐ Rural Finance Corporation

• Enabling additional investment in long‐term infrastructure projects


Asset recycling initiative


Project Construction Period Estimated Value

Melbourne Rail Link (including Airport Rail Link) 2016‐2026 $8.5b‐$11b

East West Link – Western Section 2015‐2023 $8b‐$10b

Cranbourne‐Pakenham Rail Corridor 2015‐2018 $2b‐$2.5b

East West Link – Eastern Section 2014‐2019 $6b‐$8b

CityLink‐Tulla widening 2015‐2016 Up to $850m

Princes Highway West duplication 2015‐2019 $362m

Murray Basin Rail Project 2014‐2018 $180m‐$220m

Latrobe Regional Hospital redevelopment 2014‐2018 $73m


Infrastructure program – summary


Melbourne Rail Link ‐ $8.5b‐$11b

• Rail tunnel from South Yarra to Southern Cross

• Two new underground stations at Domain and Fishermans Bend(Montague)

• Alignment will act as a major catalyst for commercial and residential development

• Increases capacity of Melbourne rail network by 30 per cent

• Construction of Airport Rail Link

Source: Department of Transport, Planning and Local Infrastructure


Cranbourne‐Pakenham Rail Corridor project ‐ $2b‐$2.5b

• 1 in 10 Melburnians to benefit from improved services on Melbourne’s busiest suburban train line

• 25 next‐generation, high capacity trains

• Accommodating an additional 4 500 passengers during peak periods

• Four level crossing removals with plans for a further five

• Gippsland V/Line services to benefit from improved reliability



East West Link – Western Section ‐ $8b‐$10b



Other infrastructure initiatives

• Up to $850m CityLink ‐ Tulla widening

• $362m Princes Highway West duplication

• $180m‐$220m Murray Basin Rail Project

• $447m to expand Victoria’s prison capacity

• Additional $685m to remove more level crossings

• $73m Latrobe Regional Hospital



Education and training initiatives


• $2.8b over five years for initiatives and enrolment funding

• $500m to build and upgrade government school facilities, including:

‐ Construction of 12 new schools

‐ More than 70 existing schools to be upgraded

• PPPs to deliver components of the school capital program

• VET funding $1.2b a year, including $30m to assist automotive workers


Health care and community services


• Additional $1.4b over four years

• $60m to boost health service capacity over the winter peak

• $156m for mental health and drug services

• $190m for elective surgery

• $200m to support people with a disability

• Additional capital expenditure


Community safety

• $33m to construct new police stations

• $783m investment in fire services

‐ CFA funding up 2.5 per cent to $457m‐ MFB funding up 3.1 per cent to $326m

• $29m for 78 new CFA fire trucks

• Correction system expansion including:

‐ Additional 871 prison beds‐ Infrastructure upgrades at Beechworth Correctional Centre and Langi Kal

Kal Prison



Regional Victoria initiatives


• $211m for 12 new schools across the State

• $28m for Barwon Health‐North Facility

• $86m Calder Highway redevelopment

• $50m Great Ocean Road upgrade

• $30m Ballarat West Employment Zone

• $73m Shepparton Law Courts


0

1

2

3

4

5

6

7

8

9

Victoria WA Queensland NSW SA Tasmania

per cen

t

12 month average to March 2014

Regional Australia average

Regional unemployment rates



• Cut payroll tax rate to 4.85 per cent from 1 July 2014, benefitting 39 000 employers

• Lowest payroll tax in Australia for businesses with payrolls from $4.7m to $26.7m

• Duty on life insurance also abolished from 1 July 2014


Revenue initiatives


2014‐15 Budget Papers

• Budget papers this year are structured along the same lines as last year

• Some incremental refinements to the presentation of content, including:

— additional clarification relating to the completion of capital projects

— continuous improvement to the defining of key terms used in budget papers


David MartineSecretary, Department of Treasury and Finance

7 May 2014

Documents

Victorian Budget 2014|15 · Victorian Budget 2014|15 Unit of measure 2013‐14 Revised 2014‐15 Budget 2015‐16 Estimate 2016‐17 Estimate 2017‐18 Estimate Net result from transactions