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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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