Wednesday, May 2, 2012
It is not really leading Victoria anywhere. It is just good housekeeping: coping with hard times by a nip here, a tuck there, maybe lots of nips and tucks and endless restraint, resisting the temptation to buy new things, so that the state ends up saving a little rather than spending more than it earns.
This time, frugality was not enough to keep the budget in the black. So Ted Baillieu and Kim Wells pulled out a few more tricks to get it over the line. They took $300 million over four years off funding for TAFE courses they see as low priority. They pinched another $420 million from the water authorities.
As a last resort, they scrapped the state's well-targeted first home buyers bonus. That saved just enough $165 million a year to create a respectable surplus in 2012-13, and something more thereafter.
Ratings agencies Moody's and Standard & Poor's gave it a tick of approval. Many Victorians will do the same. It opened no big issues for Labor to attack.
But nor was there anything resembling a jobs plan, or anything aiming to get the economy to fire on all cylinders again.
And there was nothing to answer the question Victorians are asking: why does Ted Baillieu want to be Premier? Where does he want to take us?
At some point, his government is going to have to tell us what it stands for. The budget was a missed chance to do that.
There are good things here. The $311 million of initiatives to protect vulnerable children is welcome. The $2.7 billion of new infrastructure projects will relieve a battered construction industry. Some will welcome the $670 million to build new prisons; others will ask why the state would rather fund prisons than TAFE courses.
The odd thing about this budget is that it is so normal, given that the times we are going through are anything but.
Victoria's economy is struggling under the double burden of the high dollar and high interest rates. Unemployment has climbed to 5.5 per cent. Spending by foreign students fell $1 billion last year.
Home building, retail sales, house prices, manufacturing output, they're all down. And business confidence has sunk with them.
Yesterday's welcome interest rate cut will help, but the budget won't. Since December's budget update, the state has cut $1 billion from this year's infrastructure spending. It plans a rebound to record levels in 2012-13, but over the forward estimates, state infrastructure spending is forecast to decline from 2 per cent of gross state product (GSP) in 2010-11 to just 1 per cent by 2015-16. That's only a projection, of course. And it will have to rise if the three big projects on the budget's planning list the Melbourne Metro rail project, the East West road link, and the container port at Hastings are built any time soon.
The infrastructure needs are endless. This budget commits to remove three of the 175 level crossings that shut roads down. Wells says that on average, Springvale Road is closed for 50 minutes of the two hours of peak traffic, and Mitcham Road for 54 minutes. Who can seriously argue against spending the money needed to fix problems like that?
It's by cutting infrastructure spending that the Baillieu government plans to start reducing the budget sector's net debt by 2015-16, after it peaks at $24 billion, just 6 per cent of GSP. The debate we need is whether we want the infrastructure we desire, or a AAA rating. We can't have both.
In the budget papers, Treasury argues that Victoria's economic state is challenging, but not critical. It says that employment is flat, but not falling, as the statistics report. It believes Victoria is heading for growth of just 1.5 per cent in 2011-12 and 1.75 per cent in 2012-13, not a recession. And it forecasts a recovery to begin early next year, and a positive long-term future based on exports to rapidly growing Asia.
You hope it's right.