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Coalition Government strengthens finances to grow Victoria’s economy

Thursday, 15 December 2011

Victoria's Budget will record a surplus of $1.3 billion in 2014-15 and net debt will be $804 million lower in the 2011-12 Victorian Budget Update delivered by Treasurer Kim Wells today.

Mr Wells said the Coalition Government was implementing a responsible fiscal and economic strategy to strengthen Victoria's finances, improve service delivery, invest in vital infrastructure and grow Victoria's economy.

"The Coalition Government is taking responsible steps in the context of global uncertainty to put Victoria's finances onto a more sustainable path by addressing the medium term challenges inherited from the previous government," Mr Wells said.

"The Coalition Government is prioritising investment to deliver quality community services in education, health and community safety, and improving public transport and road infrastructure by reducing unnecessary head office and administrative expenditure in the bureaucracy."

Over the 10 years to 2010-11 Victorian Government expenses growth outstripped revenue growth. The Independent Review of State Finances Interim Report concluded that this trend is unsustainable.

Victoria's public service grew at an average annual rate of 5.3 per cent over the period 2006 to 2010 compared to a 2 per cent average annual population growth over the same period.

In the 2011-12 Budget Update, the Coalition Government will reduce average expenditure growth to 3.1 per cent by implementing efficiency measures worth $1.9 billion including:

• reducing through voluntary departure packages the number of public servants in non-service delivery and back-office roles by 3,600 positions;
• non-renewal of some fixed term positions;
• reducing the number of contractors and consultants across government; and
• capping non-wage departmental expenditure growth for non-service delivery areas.

Mr Wells said there would be no reductions in key frontline services delivery areas – for example, there would be no impact on teachers, police, nurses, child protection or corrections workers.

"The Coalition Government's priority is to increase investment in quality service delivery for the community and, consistent with the Coalition's election commitments, frontline professionals in key areas such as health, education, community services and community safety will increase," Mr Wells said.

"Consistent with the weaker national outlook Victoria's taxation revenues have also been revised down.

"The measures contained in the Budget Update will in part address this shortfall and will also provide funds towards the delivery of major projects inherited from the previous government that experienced cost blowouts.

"The Coalition Government will deliver a new registration and licensing system to replace VicRoads' existing system.

"In 2005, the Victorian Ombudsman identified the urgent need for the existing VicRoads registration system to be upgraded. When the previous government finally began the development of a new system, the project was so poorly managed by Labor that it became another Labor IT project blowout that was never delivered.

"The Coalition Government has reviewed the registration and licensing project through the new high value/high risk process, and funding has now been provided to deliver this important project. However it will need to be funded through an increase in motor vehicle registrations fees," Mr Wells said.

There will be a $35 increase in the base motor vehicle registration fee from 1 April 2012, however Victoria's total registration renewal cost will remain the third lowest of the states. The duty rate on new passenger car purchases below the Commonwealth's luxury car tax threshold will also increase from 2.5 per cent to 3 per cent commencing 1 July 2012.

"The Coalition Government is implementing responsible economic reforms in the context of external challenges, including international uncertainty caused by the European financial crisis, a weaker national economy and a high Australian dollar," Mr Wells said.

"These external economic pressures reinforce the importance of strengthening Victoria's finances to grow Victoria's economy."

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