The message from Tim Pallas is simple: up with Victoria, down with Canberra.
In his second budget in six months, Victoria’s treasurer has painted a picture of the state as the “tiger in the tank” of Australia’s economic recovery from the Covid-19 recession, bouncing strongly back from a six-month lockdown that smashed Melbourne’s retail and hospitality industries.
Even before the budget papers were handed down, the difference between now and his last budget, in November, was stark.
The 2020-2021 budget was delivered in a city emerging out of six months of lockdown. Masks were worn in the lockup. Social distancing was strictly observed. A debt blowout and huge deficits were predicted.
On Thursday, Victorian media sat mask-free and elbow to elbow on the second floor of Aami Park stadium.
An optimistic Pallas talked up the state’s recovery, revising down debt predictions and saying a budget surplus was in prospect by 2023 – sooner than the commonwealth’s.
It was just one of the many ways he distinguished his approach from that of his federal counterpart, Josh Frydenberg.
The big spending and tax hits aimed at the rich appear aimed to build on Victorian pride in weathering the lockdown and a sense among Labor supporters that the state has been done down by both Canberra and the big end of town.
He emphasised the challenges faced by Victorians, the resilience of Victorians, the generosity of Victorians, continuing the rhetoric used to great effect by currently convalescing premier Daniel Andrews.
Unlike Frydenberg, Pallas is unafraid to talk up the positives of public spending. He promises that each dollar put into delivering services will deliver a double benefit, by driving the economy upwards as well as giving Victorians things that they need.
At $3.8bn, the state’s commitment to build “a new mental health system from the ground up” is 65% more than the $2.3bn Frydenberg set aside in his budget for what the federal treasurer insisted was “a national priority”.
Pallas is also sanguine about the risks posed by the state’s “big build” infrastructure spending – a $144bn pipeline of spending on road, rail, schools and hospitals that again eclipses the federal government’s commitment to spend $110bn on infrastructure over 10 years.
He acknowledges that costs on big projects have blown out, and that there’s danger that tipping more government money into the construction sector will make things worse.
But, he told reporters on Thursday, “There’s no substitute for ambition when it comes to growing our economy.”
To pay for the mental health spending, Pallas aims to soak big business through higher payroll taxes on employers who spend more than $10m a year on wages – a move that is likely to provoke screaming from employer groups, who will portray it as a tax on employment.
In justifying the tax Pallas appeared to take aim at rorting of the commonwealth’s jobkeeper scheme.
“Many big businesses have continued to profit through the pandemic – pocketing taxpayer subsidies along the way,” he told parliament.
An end to a property tax break enjoyed by Melbourne’s men-only clubs is pure trolling – it raises a measly $100,000 to $200,000 a year but will vastly annoy the members of the Melbourne and Australia clubs, none of whom were ever going to vote Labor.
Pallas predicts that as Victoria rebounds from the shutdown, its economy will grow by 6.5% next year, outstripping the country as a whole, before falling back to a rate that is still higher than the rest of Australia’s.
But despite his stated optimism about Victoria’s rebound, the budget papers show Pallas has also taken a more cautious view of the national and global economic picture than Frydenberg.
He predicts Victorian unemployment will remain above 5% for the next four years, while Frydenberg predicts Australia’s rate will fall below 4.75% by mid-2023.
With Victoria making up about 25% of Australia’s economy, it is difficult to reconcile these projections.
Pallas also has concerns that the slow vaccine rollout – another commonwealth responsibility – will derail his projections. If things go wrong it could carve a percentage point a year from state economic growth, increase state debt and push the prospect of returning to surplus further into the future, according to an analysis in budget papers.
Having “moderated” its ambitions, the commonwealth “is probably starting to get more realistic in terms of its expectations” of the vaccine program, Pallas told reporters.
“There continue to be and are persistent problems around clarity of supply of the vaccine,” he said.
“That is an issue that gives us difficulty in being able to have great certainty about when this process will be complete. But nonetheless the Victorian government is putting its shoulder to the wheel and we are demonstrating that by substantial vaccinations that we are doing.”
Unlike the commonwealth, he did not need to say.
