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State Budget Briefing
& AnalysisGrant HehirSecretary, Department of Treasury and Finance
Vince FitzGeraldChairman, the Allen Consulting Group
2010-11 Victorian Budget IPAA presentation
Grant HehirSecretary, Department of Treasury & Finance
Victorian Budget 2010-11
• Victorian economy• 2010-11 Budget financial results• 2010-11 Budget initiatives
Victorian economy
Most severe global recession since 1930s
75
80
85
90
95
100
105
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36
Months after peak
Early 1970s Early 1990s GFC 2008
Index, peak = 100
Source: OECD
Industrial production in the G7 during recessions
GFC impact more severe overseas
0
5
10
15
20
25
Spain India USA China Germany UK Australia
per cent
Sources: Sources: ABS; US BLS; Eurostat, ONS, Economist
Unemployment rate
Annual employment growth
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2004 2005 2006 2007 2008 2009 2010
Australia VictoriaSource: ABS
per cent
Victoria created 99 400 jobs in last 12 months
0
20
40
60
80
100
120
NSW Vic Qld WA SA
Total Full-time
'000s
Source: Australian Bureau of Statistics
Victorian and Euro Zone business confidence
-4
-3
-2
-1
0
1
2
3
4
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
-40
-30
-20
-10
0
10
20
30
40
Euro Zone (LHS) Victoria (RHS)
Sources: National Australia Bank; European Commission
optimistic
pessimistic
Points of std dev Net balance
Victorian dwelling approvals increasing
0
1
2
3
4
5
6
1990 1993 1996 1999 2002 2005 2008
Seasonally Adjusted Trend
Source: Australian Bureau of Statistics
000’s
Annual population growth
0.0
0.5
1.0
1.5
2.0
2.5
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Australia Victoria
per cent
Source: ABS
Victorian economic projections
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)
2010-11 Budget projections(projections in parentheses are from 2009-10 Budget Update where different)
Risks
Sustained pressure on AUD
0.6
0.7
0.8
0.9
1.0
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12
USD per AUD Concensus Forecast
Post-float average
Consensus forecasts
Source: Reserve Bank of Australia
Annual inflation rates
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2004 2005 2006 2007 2008 2009 2010
Australia MelbourneSource: ABS
per cent
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
2010-11 Budget financial results
2010-11 financial objectives and strategies
Source: Department of Treasury and Finance
Objective Short term target Long term target
Net result from transactions (operating surplus)
At least $100 million in each year. Maintain a substantial net result from transactions (operating surplus) that allows for the delivery of the Government’s infrastructure objectives.
Net financial liabilities Maintain a AAA credit rating. Maintain government net financial liabilities at prudent levels.
Infrastructure Implement strategic infrastructure projects.
Deliver world class infrastructure to maximise economic, social and environmental benefits.
Taxation Implement reforms. Provide a fair and efficient tax system that is competitive with other states.
Service delivery Implement the 2006 election commitments.
Provide improved service delivery to all Victorians.
Maintaining a substantial operating surplus
394.9
871.9
650.4
1493.21387.6
0
500
1000
1500
2000
2500
2009-10 2010-11 2011-12 2012-13 2013-14
Net result from transactions$ million
Source: Department of Treasury and Finance
Short term $100 m target
Maintaining a substantial operating surplus
12
13
14
2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13
Revenue Expenses
Source: Department of Treasury and Finance
per cent Revenue and expense growth relative to nominal GSP
Maintaining a substantial operating surplus - Discretionary revenue not fully recovered
20
22
24
26
28
2008-09 2009-10 2010-11 2011-12
$ billions
2010/11 Budget Gap
Discretionary Revenue (GST + State Taxation)
Source: Department of Treasury and Finance
Maintaining prudent financial liabilities - Net debt reduced since 2009
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014
2009-10 Budget 2010-11 Budget
per cent
Source: Department of Treasury and Finance
General government net debt/gross state product
Maintaining prudent financial liabilities
2
4
6
8
10
12
14
1999 2001 2003 2005 2007 2009 2011 2013
Net financial liabilities to GSP Net debt plus superannuation liability to GSP
Source: Department of Treasury and Finance
per centGeneral government sector net financial liabilities
Deliver world class infrastructure
0
3
6
9
12
15
1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14
NFPS Sector Cwlth stimulus passed on
$ billion
Source: Department of Treasury and Finance
Infrastructure spending
Deliver world class infrastructure
0
1
2
3
4
5
6
7
2010-11 2011-12 2012-13 2013-14
Net cash flow from operating activities Net debt
$ billion
Source: Department of Treasury and Finance
Sources of funding for net investment
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 $500 million per annum by 2012
Payroll tax rate cut to 4.90 per cent
4.50
4.75
5.00
5.25
5.50
5.75
6.00
1999-00 2001-02 2003-04 2005-06 2007-08 2009-10
per cent Payroll tax rate
Source: Department of Treasury and Finance
WorkCover premiums cut by 3.5 per cent
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2000-01 2002-03 2004-05 2006-07 2008-09 2010-11
0
5
10
15
20
25
30
35
Average premium (LHS) Number of claims (RHS)
per cent
Source: WorkCover Authorities
‘000
Tax competitiveness
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11
Source: Australian Bureau of Statistics, Department of Treasury and Finance and various state publications
Victoria
New South Wales
Queensland
per cent Taxation as a share of nominal GSP
2010-11 Budget initiatives - provide improved service delivery to all Victorians
2010-11 Budget output initiatives
2010-11Budget
2011-12Estimate
2012-13Estimate
2013-14Estimate
Education and Early Childhood Development 60.2 45.8 26.0 25.6Health 283.0 196.6 205.4 170.6Human Services 44.1 39.7 30.1 30.8Innovation, Industry and Regional Development 67.2 52.3 40.6 25.8Justice 114.3 166.8 197.6 246.6Planning and Community Development 48.3 30.7 22.9 18.2Premier and Cabinet 7.7 6.2 3.7 3.7Primary Industries 3.4 3.6 4.1 5.0Sustainability and Environment 10.9 12.8 9.8 9.5Transport 26.8 6.2 10.7 14.5Treasury and Finance 96.5 51.4 4.7 ..Parliament 1.5 1.4 1.4 1.4Government-wide 157.8 162.7 166.5 172.3Subtotal 921.7 776.1 723.4 724.1Less funding from demand and other efficiencies -503.2 -395.8 -281.5 -304.2Net impact of 2010-11 Budget new output initiatives 418.5 380.3 441.9 419.8
Add: net impact of 2009-10 Budget Update output initiatives (c) 214.6 218.7 172.4 naNet budget impact of output initiatives since 2009-10 Budget 633.1 599.0 614.3 419.8
($ million)
Net impact of 2010-11 Budget new output initiatives
Source: Department of Treasury and Finance
2010-11 Budget asset initiatives
2010-11 TEI (a)Budget
Education and Early Childhood Development 82.5 236.4Health 142.5 1 285.0Human Services 3.1 11.1Innovation, Industry and Regional Development 43.1 80.1Justice 22.6 153.2Planning and Community Development 80.2 414.5Premier and Cabinet 13.7 13.7Primary Industries 2.8 9.6Sustainability and Environment 10.8 21.9Transport 221.5 1 521.0Treasury and Finance .. ..Parliament .. ..Government wide 50.9 65.9Total 2010-11 Budget asset funding 673.7 3 812.4Add: 2009-10 Budget Update asset funding 863.7 6 230.4Asset funding since the 2009-10 Budget 1 537.4 10 042.8
2010-11 Budget new asset funding
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• $4 billion injection for Victoria’s health system in partnership with the
Commonwealth, including;• 1,000 new health workers• $2.3 billion for Victorian health care facilities since 2009-10 Budget
– $618 million for regional hospitals in Bendigo, Coleraine, Leongatha, Ballarat, Geelong, Wonthaggi and Healesville
– $408 million for Box Hill Hospital– $91 million to expand Sunshine Hospital
• $760 million for immediate service funding– 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
Putting patients first
• $935 million from COAG Agreement on health and hospitals reform– 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
• 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
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
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
2010-11 Victorian Budget IPAA presentation
Grant HehirSecretary, Department of Treasury & Finance
State Budget Briefing
& AnalysisGrant HehirSecretary, Department of Treasury and Finance
Vince FitzGeraldChairman, the Allen Consulting Group