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2010-11 Victorian State Budget - IPAA regional lunch
Grant Hehir
Secretary, Department of Treasury & Finance
Victorian Budget 2010-11
• Victorian economy
• 2010-11 Budget financial results
• 2010-11 Budget initiatives
Victorian Budget 2010-11
• Victorian economy
Most severe global recession since 1930s
Industrial production in the G7 during recessions
105
100
95
90
85
80
75
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
Index, peak = 100 Months after peak
Early 1970s Early 1990s GFC 2008
Source: OECD
GFC impact more severe overseas
per cent Unemployment rate
25
20
15
10
5
0
Spain India USA China Germany UK Australia
Sources: Sources: ABS; US BLS; Eurostat, ONS, Economist
Annual employment growth
per cent
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
2004 2005 2006 2007 2008 2009 2010
Australia Victoria
Source: ABS
Victoria created 99 400 jobs in last 12 months
'000s
120
100
80
60
40
20
0
NSW Vic Qld WA SA
Total Full-time
Source: Australian Bureau of Statistics
Victorian and Euro Zone business confidence
Points of std dev Net balance
4 40
3 30
optimistic
2 20
1 10
0 0
-1 -10
pessimistic
-2 -20
-3 -30
-4 -40
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Euro Zone (LHS) Victoria (RHS)
Sources: National Australia Bank; European Commission
Victorian dwelling approvals increasing
000’s
6
5
4
3
2
1
0
1990 1993 1996 1999 2002 2005 2008
Seasonally Adjusted Trend
Source: Australian Bureau of Statistics
Annual population growth
per cent
2.5
2.0
1.5
1.0
0.5
0.0
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Australia Victoria
Source: ABS
Greater Dandenong population
persons (‘000)
140
135
130
125
120
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Australian Bureau of Statistics
Greater Dandenong building approvals
$ million
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Building Commission
South Eastern Melbourne employment (includes Greater
Dandenong)
persons (‘000) per cent
250 15.0
225
12.5
200
175 10.0
150
7.5
125
100 5.0
75
2.5
50
25 0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Employment (LHS) Unemployment rate (RHS)
*original data, 3 month rolling average Source: Australian Bureau of Statistics
Victorian economic projections
2010-11 Budget projections
(projections in parentheses are from 2009-10 Budget Update where different)
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Actual Forecast Forecast Forecast Forecast Forecast
Real GSP 0.8 2.25 3.25 3.00 3.00 3.00
(1.50) (2.50)
Employment 0.2 2.25 2.00 1.75 1.75 1.75
(0.25) (1.25)
Unemployment rate 5.1 5.50 5.50 5.25 5.25 5.25
(6.50) (6.75) (6.75) (6.75)
Wage price index 4.0 3.00 3.25 3.50 3.50 3.50
Consumer price index 2.8 1.75 2.25 2.50 2.50 2.50
(2.00)
Population 2.2 2.10 1.90 1.80 1.70 1.70
(1.90) (1.80) (1.70) (1.60)
Victorian Budget 2010-11
• Risks
Sustained pressure on AUD
1.0
Consensus forecasts
0.9
0.8
Post float average
0.7
0.6
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12
USD per AUD Consensus Forecast
Source: Consensus Economics; Reserve Bank of Australia
Annual inflation rates
per cent
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2004 2005 2006 2007 2008 2009 2010
Australia Melbourne
Source: ABS
Economic reform strategy
• In light of these risks there is an economic reform agenda
in place:
– prudent financial management
– reducing business costs
– improving competitiveness and productivity
• education and skills
• health
• market design
• infrastructure
• 2010-11 Budget financial results
2010-11 financial objectives and strategies
Objective Short term target Long term target
Net result from transactions At least $100 million in each year. Maintain a substantial net result from transactions
(operating surplus) (operating surplus) that allows for the delivery of the
Government’s infrastructure objectives.
Net financial liabilities Maintain a AAA credit rating. Maintain government net financial liabilities at
prudent levels.
Infrastructure Implement strategic infrastructure Deliver world class infrastructure to maximise
projects. economic, social and environmental benefits.
Taxation Implement reforms. Provide a fair and efficient tax system that is
competitive with other states.
Service delivery Implement the 2006 election Provide improved service delivery to all Victorians.
commitments.
Source: Department of Treasury and Finance
Maintaining a substantial operating surplus
Net result from transactions
$ million
2500
2000
Short term
$100 m target 1493.2
1500 1387.6
1000 871.9
650.4
500 394.9
0
2009-10 2010-11 2011-12 2012-13 2013-14
Source: Department of Treasury and Finance
Maintaining a substantial operating surplus
per cent Revenue and expense growth relative to nominal GSP
14
13
12
2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13
Revenue Expenses
Source: Department of Treasury and Finance
Maintaining a substantial operating surplus
- Discretionary revenue not fully recovered
$ billions Discretionary Revenue (GST + State Taxation)
28
26
24
22
20
2008-09 2009-10 2010-11 2011-12
2010/11 Budget Gap
Source: Department of Treasury and Finance
Maintaining prudent financial liabilities
- Net debt reduced since 2009
per cent General government net debt/gross state product
6
5
4
3
2
1
0
2007 2008 2009 2010 2011 2012 2013 2014
2009-10 Budget 2010-11 Budget
Source: Department of Treasury and Finance
Deliver world class infrastructure
Total infrastructure spend
$ billion
15
12
9
6
3
0
1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14
NFPS Sector Cwlth stimulus passed on PPPs since signed
Source: Department of Treasury and Finance
Deliver world class infrastructure
Sources of funding for net investment
$ billion
7
6
5
4
3
2
1
0
2010-11 2011-12 2012-13 2013-14
Net cash flow from operating activities Net debt
Source: Department of Treasury and Finance
Improving business competitiveness
• Payroll tax cut
– Saving to business of $193 million
– Seven cuts in 10 years
• Workcover premiums cut
– Saving to business of $240 million
– Six cuts in last 7 years
• Land tax cuts
– Exemption of up to two years for construction of residential aged
care facilities and retirement villages
• Red tape reductions
– Government has doubled target and now plans to cut regulatory
burden by $500 million per annum by 2012
Payroll tax rate cut to 4.90 per cent
per cent Payroll tax rate
6.00
5.75
5.50
5.25
5.00
4.75
4.50
1999-00 2001-02 2003-04 2005-06 2007-08 2009-10
Source: Department of Treasury and Finance
WorkCover premiums cut by 3.5 per cent
per cent ‘000
2.4 35
2.2 30
2.0 25
1.8 20
1.6 15
1.4 10
1.2 5
1.0 0
2000-01 2002-03 2004-05 2006-07 2008-09 2010-11
Average premium (LHS) Number of claims (RHS)
Source: WorkCover Authorities
• 2010-11 Budget initiatives - provide
improved service delivery to all Victorians
2010-11 Budget output initiatives
Net impact of 2010-11 Budget new output initiatives
($ million)
2010-11 2011-12 2012-13 2013-14
Budget Estimate Estimate Estimate
Education and Early Childhood Development 60.2 45.8 26.0 25.6
Health 283.0 196.6 205.4 170.6
Human Services 44.1 39.7 30.1 30.8
Innovation, Industry and Regional Development 67.2 52.3 40.6 25.8
Justice 114.3 166.8 197.6 246.6
Planning and Community Development 48.3 30.7 22.9 18.2
Premier and Cabinet 7.7 6.2 3.7 3.7
Primary Industries 3.4 3.6 4.1 5.0
Sustainability and Environment 10.9 12.8 9.8 9.5
Transport 26.8 6.2 10.7 14.5
Treasury and Finance 96.5 51.4 4.7 ..
Parliament 1.5 1.4 1.4 1.4
Government-wide 157.8 162.7 166.5 172.3
Subtotal 921.7 776.1 723.4 724.1
Less funding from demand and other efficiencies -503.2 -395.8 -281.5 -304.2
Net impact of 2010-11 Budget new output initiatives 418.5 380.3 441.9 419.8
Add: net impact of 2009-10 Budget Update output initiatives (c) 214.6 218.7 172.4 na
Net budget impact of output initiatives since 2009-10 Budget 633.1 599.0 614.3 419.8
Source: Department of Treasury and Finance
2010-11 Budget asset initiatives
2010-11 Budget new asset funding
2010-11 TEI (a)
Budget
Education and Early Childhood Development 82.5 236.4
Health 142.5 1 285.0
Human Services 3.1 11.1
Innovation, Industry and Regional Development 43.1 80.1
Justice 22.6 153.2
Planning and Community Development 80.2 414.5
Premier and Cabinet 13.7 13.7
Primary Industries 2.8 9.6
Sustainability and Environment 10.8 21.9
Transport 221.5 1 521.0
Treasury and Finance .. ..
Parliament .. ..
Government wide 50.9 65.9
Total 2010-11 Budget asset funding 673.7 3 812.4
Add: 2009-10 Budget Update asset funding 863.7 6 230.4
Asset funding since the 2009-10 Budget 1 537.4 10 042.8
Source: Department of Treasury and Finance
Investing in education
• Victorian Schools Plan – First tranche exceeded
– 553 school upgrades/refurbishments funded this term
– Exceeded promise to fund 500 this term
• Blueprint for education and early childhood development
– 42 actions towards system improvement, partnerships with parents and
communities and workforce reform
• $287 million to support non-government schools
– Support for disadvantaged students and students with disabilities
• Building the Education Revolution
– Delivering $2.6 billion of capital works in partnership with
Commonwealth Government
Investing in lifelong learning
• Early childhood development
– 3,590 extra kindergarten places and 126 kindergarten teachers
– Partnership with the Commonwealth Government to deliver National
Quality Agenda for Early Childhood Education and Care
– Establishing the Victorian Deaf Education Institute
– Major upgrades to Glenroy Specialist School, Northern School for
Autism and Eastern Autistic School
• Support for TAFE sector
– New infrastructure including new Teaching & Learning Centre for NMIT
– Apprenticeship completion bonus and accommodation allowance
Putting patients first …
• Capital upgrade for Victorian health care facilities ($2.3 billion)
– $618 million for regional hospitals in Bendigo, Coleraine, Leongatha,
Ballarat, Geelong, Wonthaggi and Healesville
– Box Hill Hospital and expansion of Sunshine Hospital
• Making Victoria a leader in Cancer research and treatment
– Parkville Comprehensive Cancer Centre, Olivia Newton-John Cancer and
Wellness Centre - Stage 2a, Ballarat Regional Integrated Cancer Centre
• Immediate service funding boost ($760 million)
– 22,000 additional inpatient services in 2010-11
– 9,000 elective surgery treatments over two years
– 32,000 additional outpatient appointments in 2010-11
• Expanding support for people experiencing mental illness
– New Mental Health Bill
– Boosting early intervention programs for young people including youth
suicide prevention and youth and mental health outreach teams
… and a second budget
• COAG Agreement on Health and Hospitals Reform, April 2010
– Locked in an extra $4.7 billion for Victorian patients over the next ten years
– Lifts the Commonwealth contribution from 41% to 45%
• An extra $935 million for Victoria over next four years
– 150,000 more emergency departmental patients each year being treated
– 34,000 more patients receiving elective surgery faster
– additional 332 sub-acute beds enabling treatment of 5,000 patients annually
• An extra $386 million for Victorian services run by Commonwealth over
next four years
– General Practice and primary health care services, more health workers,
aged care and mental health services
A Fairer Victoria – strengthening the safety net
• Helping households with rising living costs
– Increasing the water concession for 669,000 households
– Continuation of the Waterwise program for water audits & retrofitting
• Looking after vulnerable children
– Addressing out of home care service growth and enhancing quality
services for traumatised children ($35 million)
– Family services to better assist children at risk ($24 million)
• Ongoing support for people with a disability
– Increase in funding for Community Service Organisations
– Better resourcing 24-hour shared support accommodation
($35 million plus $11 million in asset funding)
– Supporting people with autism and their families ($7.5 million)
Retargeting the First Home Bonus
• 69% of Victorians own their home
• First Home Bonus created 19 000 jobs last year (HIA)
• FHB takes pressure off the rental market
• First Home Bonus refocused to newly constructed homes
• Boost for housing and employment in CADs ($10 million)
• Support for community infrastructure ($22 million)
• NRAS - $237 million for up to 7 500 affordable dwellings
Delivering the Victorian Transport Plan
• 50 new low floor trams and supporting infrastructure to move an extra
10,000 passengers at a time
• 20 premium station upgrades including 100 additional station staff
• Four new train stations in growth corridors
– Cardinia Road, Williams Landing, Lynbrook and Caroline Springs
• Transport connections program to assist regional and rural
communities
• Geelong Ring Road (stage 4c), Regional Rail Link
• Monash Freeway Noise Walls
Working with the community to tackle the
causes of crime
• Delivering the Respect agenda
– Funding A Right to Respect tackling sexual and domestic violence
against women ($14 million)
– Fifty five additional youth workers to support young people ($22
million)
– Launched the Knives Scar Lives campaign
• Swifter access to justice
– Managing court demand and legal services master plan ($64
million)
– Boost to Victoria Legal Aid ($50 million)
Promoting community safety
• Delivering 1,966 frontline police back on the streets
– Biggest one-off boost in Victoria’s recent history
• Building an effective corrections system
– Increased capacity for women’s prison accommodation ($81 million)
– Additional men’s prison accommodation ($46 million)
– Continuation of Better Pathways strategy to reduce women’s
imprisonment and re-offending
Bushfire reconstruction and preparedness
• 2009-10 Budget: Immediate Response ($986 million)
– 33 Community Recovery Centres
– Over 200 case managers appointed
– Clearing over 3,000 damaged properties
• Interim Report response announced in 2009-10 ($61 million)
– Improvements to bushfire information services
• New funding in 2010-11 Budget ($254 million)
– Preparedness and community education ($92 million)
– Emergency response initiatives ($79 million)
– Extra support for Victorian Bushfire Reconstruction and Recovery
Authority
Our environment – continuing Victoria’s
Leadership
• Leadership in tackling climate change
– Support for ETS
– Climate Change White Paper to be delivered this year
– Climate Change Bill
– Land & Biodiversity package released in December 2009
• Jobs for the Future Economy statement ($175 million)
– Improve the energy and water efficiency of the State’s hospitals,
schools and government buildings
– New research and industry partnerships in sustainable industries
• Free entry to national parks
– Estimated to boost visitation by 25-50% a year
Metropolitan Map - Dandenong
• Continuation of Revitalising Central Dandenong
• Separating road and rail Dandenong corridor investigation
• Duplication of Hallam road in Hampton Park
• Development of metropolitan freight terminals
• Supporting 90 jobs at the Ceramic Fuel Cells Limited production
facility in Noble Park through BlueGen units
• Dandenong/Springvale School Regeneration Project
• Funding to provide free entry to William Ricketts Sanctuary and
National Rhododendron Gardens
Regional initiatives – Barwon South West
• Connecting the Geelong Ring Road to Surf Coast Highway –
Stage 4c
• Expansion of acute capacity at Geelong Hospital
• Planning and land purchase for new community hospital in Geelong
Southern suburbs
• Urban renewal program in Corio and Norlane – including bus and
rail improvements
• $26 million for the redevelopment and expansion of Coleraine
Hospital
• New multidisciplinary centre in Geelong to respond to sexual assault
• New and upgraded VICSES equipment at Winchelsea, Port
Campbell and Lismore
• Delivering community infrastructure for Armstrong Creek
• Improved transport services between Colac Otway and Surf Coast
through the Transport Connections program
• Western Heights regeneration project
Regional initiatives - Grampians
• $55 million to redevelop Ballarat Regional Integrated Cancer Centre
• New facilities to replace Daylesford police station
• New and upgraded VICSES equipment at Dimboola, Horsham, Nhill and
Bacchus Marsh
• Intersection improvements in Ballarat – Buninyong Road at Mount Clear
• Upgraded facilities at Grampians National Park
• Transfer Victoria police call taking and dispatch centres to
Emergency Services Telecommunications Authority in Ballarat
• Connecting transport disadvantaged individuals and groups to transport
services in the Ballarat area as part of Transport Connections
• New Regional Rail Link to connect regional Victoria
• New permanent buildings at Halls Gap Primary school and Woady
Yaloak Primary School
Regional initiatives – Loddon Mallee
• $473 million for new Bendigo Hospital – largest regional hospital
project undertaken in Victoria
• Ouyen school regeneration project
• New Regional Rail Link to connect regional Victoria
• Bendigo Education Plan (Regeneration of Bendigo South East
Secondary College and Weeroona College)
• Upgrades to Tarrengower prison
• Modernisation of Bendigo Senior Secondary College
• New facilities at Lockwood South Primary School
• Echuca Police Station land purchase
• New and upgraded VICSES equipment and Kyabram and Wedderburn
• Delivering seminars and workshops to support small businesses
Regional initiatives – Hume
• Ongoing delivery of bushfire reconstruction and recovery
• New and upgraded VICSES equipment at Wodonga, Yackandandah,
Murchison, Euroa, Tallangatta, Tatura, Alexandra, Kilmore, Mansfield
and Numurkah
• New permanent facilities at Tawonga primary school
• Expansion of ambulance services for Kinglake and Whittlesea
• Ongoing work for modernising irrigation infrastructure in Northern
Victoria through Foodbowl Modernisation project and North East rail
revitalisation project
• Rebuilding Toolamba primary school
Regional initiatives – Gippsland
• New police station for Loch Sport
• Modernisation of Trafalgar police station
• $25 million for Leongatha Hospital Stage 2 redevelopment
• Extension of emergency department at Bass Coast Wonthaggi
Hospital
• Upgrades to the Princes Highway East from Traralgon to Sale
• Summerland Estate Rehabilitation in Phillip Island
• Replacement of Callignee hall
• Support for Lake Tyers Aboriginal community
• Delivering seminars and workshops to assist small businesses in
Leongatha and Lakes Entrance
2010-11 Victorian State Budget - IPAA regional lunch
Grant Hehir
Secretary, Department of Treasury & Finance
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