The Andrews Government’s State Budget splashes mega money to spend Victoria out of an economic pit

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Talk about timing.

Victoria’s Budget was repeatedly delayed, as its residents stayed home, wore masks and lived under curfew.

It’s more than 500 days since the last one, and until last month the Budget didn’t even have a date in the calendar. But the Victorian Government got lucky today, with circumstances proving its point.

During the harsh lockdown aimed at stemming the fatal second wave of coronavirus infections, the Andrews Government resisted repeated calls from the business lobby to wind back restrictions and “reopen” the economy.

Health — stopping the spread — and the economy weren’t competing against each other, it tried to argue, but intertwined.

Today, Victoria is celebrating its first day in months when there are no cases of coronavirus in the state, with the last patient discharged from hospital.

And the Government released a firehose of budget cash, dousing the economy in stimulus programs designed to create jobs, boost flagging industries and rocket a recovery.

This is mega money

With interest rates at historic lows, and not going anywhere for a while, the state will blow its debt out to a record $155 billion in the next four years.

That money will fund an infrastructure binge — spending almost $20 billion each year until 2024 — and social programs that directly employ Victorians in jobs such as school tutors and mental health workers.

“We’ve got a $23 billion operating deficit … but we’re aiming to get that down to $5.9 billion in three years,” Treasurer Tim Pallas told a lock-up of journalists examining the figures this morning.

“It’s necessary to get Victoria back to work.”

He’s not concerned by the eye-watering numbers, arguing that as the economy strengthens, off the back of growth propelled by the spending, the budget position will recover and it’ll be able to pay the debt down.

(Unlike households, governments can also make money by imposing taxes and fines. A small charge on electric vehicle owners is the only new impost in this Budget.)

We already knew about $5.3 billion being spent on social housing, nearly $870 million for the mental health system and $250 million to hire tutors to help children get back up to speed after almost half a year of home-schooling.

Today we learned that stamp duty will be cut in half for six months, aiming to push a building boom in affordable housing on Melbourne’s fringes and regional areas. (A $1 million cap on home values rules out houses in the inner ring of the capital.)

Sales of existing properties will enjoy a stamp duty cut of 25 per cent.

Climbing out

The road back is steep. The Victorian economy contracted by 4 per cent last year, or $16 billion.

From that pit, some colossal goals have been set. The Government believes unemployment will peak at 8.25 per cent, when last month’s figure was 7.4 per cent.

It wants 200,000 more people employed by 2022 than at the bottom of the downturn this year, with that growth part of a $43.9 billion increase in gross state product (GSP) in the years to 2024.

There are some big assumptions here, including that there won’t be any further substantial coronavirus outbreaks and that we’ll start welcoming international tourists again in the coming years.

“I’d love it to be a V-shaped recovery,” Mr Pallas said. “I think it’ll be more of a tick.”

With billions flooding out the door — on everything from a contemporary art museum and new hospitals to wage subsidies for women aged over 45 — we won’t have to wait long to find out if the firehose of cash prompts green shoots, or flows down the drain.

By business reporter Daniel Ziffer (Original ABC Article)

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