Jobs, jobs, jobs.

Whilst this budget may have been pitched as ‘for families’, meeting Victoria’s employment needs is a paramount focus for the Victorian Government.

The Victorian Government faces the reality of the closure of the car manufacturing sector on its watch.

Toyota is anticipated to end production in 2016 and Ford will cease manufacturing operations in 2017. Along with Holden, and the flow on effects to the component manufacturing and supplier industries, they’ll account for the direct and indirect loss of up to 25,000 jobs in Victoria[i], impacting particularly hard on specific regions across Melbourne and Geelong.

In the overall context of the Victorian economy and employment numbers, the psychological and confidence impacts on the Victorian community will likely be more damaging than the actual job losses themselves.

These psychological and confidence impacts may affect consumer and investment activity. They may also heighten political concerns.

In other words, the closures may not be of the Andrews Government’s making, but what are they doing to respond to the job losses?

The Budget papers forecast a steady decline in the unemployment rate over the next four years from a current 6.5% to 5.75%, even against the backdrop of massive car industry job losses.

So what is going to save the day?

Many factors impact on the unemployment rate, and a good number of those are beyond the scope of state governments to control.

The Andrews Government is utilising a traditional Labor Government suite of tools to tackle unemployment, ranging from payroll tax relief for certain classes of employment through to spending on programs (for instance the increase in health patient outputs funded in the budget will require the employment of additional healthcare workers) and infrastructure projects.

Commentators have already noted that with many of the Andrews Government’s major infrastructure and asset acquisition projects, serious money doesn’t begin to flow until later in this term of government. Amounts have been allocated for planning, land acquisition, design works in the short term but the serious construction phase funding is either allocated to the out years, or is yet to be allocated at all.

The following asset expenditure items from the transport and health portfolios show how the funds will flow on major projects, and jobs be created, just when they’re needed in the 2016-17 and 2017-18 financial years:

	2014-15	2015- 16	2016- 17	2017- 18	2018- 19	TEI
High-capacity metro trains	..	21.9	40.5	83.0	124.4	1 301.0
Melbourne Metro Rail Project	40.0	122.4	137.6	420.0	840.0	9 000–11 000
Chandler Highway bridge duplication	..	2.2	26.8	56.8	24.3	110.0
New E-Class trams	..	37.3	163.9	91.1	2.5	294.8
New VLocity carriages for the regional network	..	87.4	127.8	34.3	7.5	257.1
X’Trapolis trains – five six‑car sets	18.0	7.2	64.8	..	..	90.0
Werribee Mercy Hospital – acute expansion	..	2.0	33.0	43.0	7.0	85.0
Western Women’s and Children’s Hospital	..	14.7	66.1	79.5	37.6	200.0
Casey Hospital expansion	..	0.4	2.0	tbc	tbc	106.3
Mernda Rail Link	..	9.0	..	..	..	9.0

 

The Casey Hospital expansion and Mernda Rail Link project don’t yet show an allocation of funds beyond initial planning requirements, however its likely in both case that substantial funding will be made available over the course of the back end of the forward estimates period.

Is that it for infrastructure spending over the next four years?

Not likely.

The Victorian Government, fulfilling an election promise, has pledged to establish Infrastructure Victoria, an independent body to assess major infrastructure projects by late 2015.

The Government has already flagged that it will ask Infrastructure Victoria to consider the merits of a second container port to be sited at either Hastings or Baywest.

Beyond that, it will want to have a pipeline of projects for the new body to consider.

After all, the Government wouldn’t want to go the trouble of establishing Infrastructure Victoria, and have nothing for it to do.

There is financial capacity to entertain more infrastructure spending than currently committed in the Budget.

The Budget identifies about $3 billion in unallocated funds across the forward years that the Government can commit to new capital projects (or use indirectly to meet increases in public sector wage bills above and beyond currently budgeted expectations for employment numbers and enterprise bargaining outcomes).

Future budgets are also likely to recognise and make provision for new projects – with spending to commence before the next State Election’s due in November 2018 – funded through surpluses, or some increase in borrowing, or through use of PPPs and other alternative funding models.

[i] Budget Paper No. 2, Pg 39

Gonski goneski in the out years?

Not so much a tongue twister as a political strategy

The budget includes significant new money for education spending.

As well as new capital projects including building new schools and technical colleges, and a program of upgrades and renovations, there’s also an increase in program spending.

The Victorian Government had already announced an increasing funding to the Catholic and private schools sector, in line with its election commitments. Public education advocates had expressed concern as to whether the Victorian Government would meet its commitment to deliver Gonski-level funding to the public sector.

It has, but only for the next two years.

It has filled the gap in 2015/16 and 2016/17 left by the Abbott Government’s underfunding of the Gonski methodology, but made no commitment to do the same for the last two years of the forward estimates.

Rather, the Victorian Government will turn its eyes, its wallet and its political focus to Canberra.

The Andrews Government is neatly marking out its own federal election platform which it will pitch to both Tony Abbott and Bill Shorten.

On top of its already stated ‘ask’ of federal government funding to be made available for transport projects (i.e. freeing up the $3billion that was allocated to the East West Link project), it will now campaign to get a commitment from both sides of politics to fully fund the Gonski model in forward years.

The timing fits nicely. A federal election could be held anytime up until late 2016. Time enough for either or both parties to commit to filling Victoria’s Gonski gap from 2017/18 onwards.