May 7, 2013 By FTI Consulting
Budgets, State and Federal are by nature political documents as much as they are financial blueprints. Today’s Victorian budget appears to strike a near perfect balance in that it is forecasting surpluses out to 2016-2017 while simultaneously investing in infrastructure to please business and assuage marginal seats voters.
Newly minted Premier Denis Napthine and his novice Treasurer, Michael O’Brien have laid the groundwork for a revitalisation of the Coalition’s fortunes at the November 2014 state election after two years of reasonably austere financial management that has in part been drag on the Government’s poll numbers.
The budget forecasts economic growth of 2.25% and 2.75% respectively over the next two financial years and expects unemployment to fall to 5% over the four year forward estimates period. Net debt as a proportion of Gross State Product is predicted to fall from 6.4% to 5.4% by 2016-2017.
Critically against the backdrop of deficits for as far as the eye can see and fierce debate over revenue shortfalls and expenditure growth at a Federal level, the Victorian Government is forecasting growth in expenditure of 2.7% and revenue growth of 4.1% next financial year.
The forecasts are of a kind that Wayne Swan and the Prime Minister would kill for and which might have been described by Paul Keating as “a beautiful set of numbers.”
O’Brien, a one-time staffer to former Federal Treasurer Peter Costello, has framed a budget that;
The business community is likely to be pleased with the budget because the infrastructure spending is targeted at expansions to the Port of Melbourne (Australia’s busiest container port), re-development of the Port of Hastings and crucial road upgrades, all of which are important to lifting productivity.
In the medium to longer term, the Government has effectively committed to building the $8 billion East/West road link that will require private sector investment on a scale not seen since the Kennett Government built City Link in the 1990’s.
Coupled with additional spending on police, nurses, doctors, the disability sector and commuter rail enhancements, it seems Dr. Napthine and Mr O’Brien are quickly charting a new path compared to the one taken by Ted Baillieu who was toppled in a bloodless coup just two months ago.
Mr Baillieu, rightly or wrongly, was often criticised as being a ‘do nothing Premier’ and the Government’s poll numbers suffered from the perception. Napthine has been at pains to create a sense of momentum since taking the top job and the budget reflects this, right down to its banner headline of “Building for Growth.”