The Guardian 11 May, 2005
Victorian budget pleases big end of town
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.