The Guardian 11 May, 2005
Victorian budget pleases big end of town
Bob Briton
Victorian Treasurer John Brumby would have to be happy with the response to his latest
state budget. It is not even election year budget and yet it is being given the same
reception as the big-spending, vote-catching exercise that usually precedes a poll. While
the bosses are still pressing for more favours, they have welcomed cuts in land tax,
WorkCover premiums and bank account debit tax.
And working people are being encouraged to believe that the heavily hyped $10 billion
commitment to infrastructure projects over the next four years will make big improvements in
decaying, cash-starved sectors like health, education and transport. But has Brumby really
given the people of Victoria a new deal and why do the biggest grinners occupy offices in the
big end of town?
The figures look impressive. A billion dollars will be spent on health including a $358 million
capital component for items like the first stage of a new Royal Children's Hospital. There will be
$30 million spent on a "blitz" on elective surgery to do something for the 10,000 people currently
waiting for treatment. The package will apparently allow hospitals to hire 900 more staff and
admit 40,000 patients.
In education, $94 million will be made available for the construction and completion of 16 new
and replacement schools, $115 million will be put towards getting the more disadvantaged non-
government schools up to national benchmarks. Another $300 million has been allocated to
reduce class sizes and do something about lagging literacy and numeracy standards — currently
the worst in the country.
Outlays have led Treasurer Brumby to break with the conventions of the past decade and a half
by borrowing to fund spending and to increase state net debt by about one per cent of gross
state product by 2009. However, nobody is questioning the "fiscal responsibility" of the budget
and ratings agency Standard & Poor's is not considering a downgrade of Victoria's triple-A
rating. How come?
Firstly, not all the budget items are as big as they first seem; not all of it is "new" money. It
includes commitments made over recent times like the $180 million for new mental health
facilities — part of the already announced $788 million "social justice package". Big business
would be happy that savings of more than $532 million will be found in "general public service
efficiencies". They would have noted the ultimatums given recently to seven of the 14
metropolitan hospital groups which will force several hospitals to increase admissions and to
reduce waiting lists without increasing costs or staff levels [see Guardian article last
issue].
A number of hospitals will be obliged to simply not fill vacancies left by staff as they leave and to
dramatically increase charges to patients and families for items like phone hire and parking.
This government gives out very mixed messages about spending but its intention to continue its
cuts to public services is unwavering.
Others complain that the budget figures, while they sound impressive, will not make the impact
on infrastructure and services that decades of neo-liberal inspired neglect urgently call for. The
health sector is still in crisis in spite of a $2 billion cash injection last year. This year's
"commitment" of what turns out to be considerably less than $1 billion of new funds is not likely
to turn the present disastrous situation in the state's health services around. The state branch of
the Australian Education Union has the same concerns about the proposed education
spending.
Meanwhile, the Victorian Employers Chamber of Commerce has given the thumbs up to the
budget. They believe changes will lead to new investment and, of course, lots of new jobs.
Particularly appreciated are savings to business on land tax. The measure will cost $823 million
over five years and, unlike the promises made to the rest of the community, it will produce
bankable results in the very near future. About 20,000 small and medium sized businesses will
soon receive a cheque for a refund of some of this year's land tax (backdated to January 2004)
and with more savings to come. This cost the state $72 million. By the way — compare the cost
of this measure to the $30 million "blitz" on elective surgery to see Mr Brumby's
priorities.
The threshold on the value of property before the tax kicks in has been raised from $175,000 to
$200,000 and the rate of tax has been cut for the middle bracket of properties valued between
$750,000 and $2.7 million. Owners in this bracket now have the cheapest land taxes in
Australia and will have them capped until the end of 2006. By that time, business might well be
granted their wish to have land taxes indexed.
Employers will also have a reduction of WorkCover premiums to an average of 1.8 per cent of
payroll. This will save bosses about $170 million a year. Victoria now puts the second lowest
demand on the bosses to contribute to its workers' compensation scheme; only Queensland is
beating it in the race to the bottom.
Mr Brumby describes the savings to business in the budget as "truly dramatic… For every
business, this is a reduction of costs of 15 to 16 per cent."
Business is also looking forward to the construction work promised in the budget; these could
be gifts that keep on giving. Mr Brumby is a champion of controversial public-private
infrastructure partnerships (PPPs) which give the private sector a profit-making role in jointly
funded public infrastructure. He has defied large sections of his own party and the unions to do
this — he even drove the creation of a national council to work out ways to cut costs for and
increase the use of PPPs. No wonder that the bosses are cheerleaders for the latest budget of
this driest of dry Labor treasurers. With the cycle of state and federal budgets ahead, the
bosses are trusting that this is first in a series of good news stories for them.