Victoria’s surpluses take $1 billion hit

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The Age: Victoria’s surpluses take $1 billion hit December 23, 2014 Richard Willingham, State Political Correspondent

Victoria’s surpluses have taken a $1 billion hit on the back of a weaker economy and higher than projected unemployment, new Treasury documents show.

The state is also bracing for a smaller GST distribution from 2016-17 because of other states’ mining royalties dropping and a slump in iron ore prices.

The mid-year budget update, tabled on the first day of the 59th Victorian parliament, showed forecast surpluses had been downgraded by $1 billion from the pre-election budget figures, to total just $8.1 billion over the four years to 2017-18.

The document also warns that there will only be a gradual drop in the average unemployment rate, with the yearly average expected to drop to 5.75 per cent by 2017-18. The 2014-15 rate has been revised up to 6.75 per cent.

“The unemployment rate is expected to fall gradually over the forward estimates in line with improving household demand, leading to increased hiring intentions by business,” the update says.

“However, the return to trend levels of unemployment is expected to be slower than previously forecast.”

The update also includes a suite of new spending from the new Labor government with $40 million to set-up and run the Royal Commission into Family Violence.

During his first question time as Premier, Daniel Andrews announced further details about the royal commission.

It will be led by Supreme Court Justice of Appeal Marcia Neave and begin sitting in February, with the terms of the inquiry to be announced in January.

The deputy commissioners are Patricia Faulkner, chair of Jesuit Social Services and the National Health Performance Authority, and Brotherhood of St Laurence executive director Tony Nicholson.

Labor has also allocated $20 million towards its $320 million TAFE rescue package and $40 million to set up Infrastructure Victoria, an independent body to oversee major projects.

Victoria’s gross state product (GSP) grew by 1.7 per cent in 2013-14, lower than the 2 per cent forecast in the pre-election update; as a result treasury has revised down GSP growth over the coming years.

Shadow Treasurer Michael O’Brien warned that the state’s triple-A credit rating could come under threat with net debt forecast to rise to 4.8 percent to 2018.

“[Treasurer] Tim Pallas is saying under Labor economic growth will be slower, unemployment higher and surpluses $1 billion less than under the Coalition,” Mr O’Brien said.

“This is a clear sign that Tim Pallas has given up as Treasurer in his first month.”

In a statement Mr Pallas focused on the new initiatives designed to stimulate jobs as well as the rise of unemployment over the past four years saying it would be a legacy of the Napthine Government.

“After four years of the Liberals, Victoria has the worst unemployment rate on the Australian mainland, and the worst in this state since Ansett collapsed more than a decade ago,” Mr Pallas said.

He also highlighted a $166 million shortfall in funding for prison beds, which the budget update shows Labor will now fund.

“The Liberals deliberately left behind a $166 million black hole to help them win an election. This is shameless stuff,” he said.

Labor tabled the Back to Work act as its first bill on Tuesday, which will give business tax and other incentives to give jobs to young people and the long-term unemployed. That scheme will cost $100 million.

And the budget update sheds no new light on how much compensation for the consortium contracted to build the East West Link will receive.

“The government has suspended all works and is considering the way forward. Any financial exposures of the state in respect of East West Link are not able to be estimated reliable at this time.”

With Tom Cowie

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