The Victorian Government is undertaking a delicate balancing act between workforce capacity constraints, high demand for housing, the need for productivity-enhancing infrastructure, cost-of-living needs and reigning in government debt. This budget shuffles the deck to prioritise spending where it is most needed over the next financial year, while moving spending on larger infrastructure projects to a time when workforce constraints have eased . There is little in the way of additional spending or new taxes, resulting further growth in Victoria’s net debt until FY2027/28. This budget paves the way for bolder policy decisions to be made over the next two years by the Allan government as workforce capacity improves, while doing what it can to keep Victorian families buoyant during the cost-of-living crunch across the state.
Housing and housing construction is understandably taking a front seat in the budget, with the Victorian Homebuyer Fund being extended at a value of $700 million to first home buyers for the next year, at which time it is assumed the Australia-wide Help to Buy scheme will take its place. This is a risk to next years’ budget should the scheme face a similarly uncertain passage through federal parliament as the Housing Australia Future Fund. Substantial promises have been made in response to the housing crisis, such as the Victoria Homebuyer Fund and Housing Agenda, but they fail to address potential supply chain issues and there is uncertainty about prioritisation and logistical feasibility.
It is encouraging to see support extended to those already impacted by the housing crisis, specifically, people experiencing or at risk of homelessness, and significantly, renters. Across direct financial support, advice and additional funding for community organisations, there is a whole-of-sector approach to ensuring renters and people with insecure housing can access further support.
Transport and major infrastructure have understandably seen the brunt of funding changes in this year’s budget. Since 2014, the Victorian Government has committed $120 billion to planning, building, operating, and upgrading Victoria’s transport network. The Victorian Government has continued their commitment to key major projects and provided additional funds towards working to complete or accelerate completion of underway projects. The Budget also held continued funding ($100 million) to repair roads after recent storms and flooding across Victoria. The Victorian Government further pledged funding to continue removing level crossings (aimed at 110 by 2030). Funding commitments have been made possible through the delay of other major projects, most notably the Melbourne Airport Rail project. This signifies the significant funding and workforce capacity constraints facing delivery of infrastructure and housing in the state, which has seen construction costs rise 22 per cent since 2021 and left a worker shortfall of 229,000.
The workforce shortage is not only impacting the property sector, but has been felt in the social work, education and healthcare systems. Best Start, Best Life reforms (free kinder, pre-prep, three-year-old kinder, early learning centres) will be rolled out slower than anticipated, with a new completion date of 2036, as compared to the original deadline of 2032 alongside the promise of Free Kinder in Victoria. The treasurer attributes these delays to workforce shortages that need to be addressed for the programs to function, with an estimated need of 11,000 additional educators and teachers for Best Start, Best Life. If successful, this means the education workforce will have more than doubled since 2019. These workforce issues will be addressed with $370 million to attract, train, and recruit more early childhood educators and teachers through scholarships, traineeships, and overseas recruitment. We welcome similar education and training commitments to the mental health, vocational education and medical practitioners space to boost the supply of construction workers, mental health workers, social workers and General Practitioners, all of which have been chronically needed since COVID-19.
A pipeline of social and sustainable infrastructure sees the Victorian government continue to have to spend big to meet the needs of a growing population while meeting policy commitments. Changes to the proposed Royal Melbourne and Royal Women’s Hospital away from the intended Arden site has made way for potential homes for health workers through build to rent initiatives. This aligns the need for new infrastructure with the increasingly difficult task of attracting workers to the health system as cost-of-living outpaces wages in the sector. Of the $1.7 billion allocated for hospital upgrades, very little of this will be received in this financial year due to competing builds, with most costs experienced at the end of the budget cycle. Three community hospitals in Emerald Hill, Eltham and Torquay meant to be completed this year are under review, out of 10 to be completed between 2024 and 2026.
Victoria continues to lead the country in Mental Health investments, in that the Victorian government has already delivered the largest investment of any state in this area and is committed to all recommendations of the Royal Commission into Victoria’s Mental Health System. In addition to the continuation of existing programs, $31 million has been dedicated to treating eating disorders and establishing an in-home intensive early engagement and treatment program, 10 dedicated early intervention professionals in the communities that need them most, bed-based treatment at Melbourne, Austin, and Monash Health, and an Eating Disorders Day Program in regional Victoria. However, Mental Health and Wellbeing Local hubs are another victim of workforce-related delays, with an estimation of 2,500 additional mental health workers required to deliver the promised hubs.
The importance of addressing the domestic and family violence crisis has been elevated in the budget with a series of targeted programs receiving funding, reflecting the importance of extending beyond a one-size-fits-all model. Of note are several programs targeted towards the unique contexts and experiences of Aboriginal Victorians experiencing family violence, utilising culturally appropriate methods. These programs align with the national strategy and recent regulatory changes tackling family and domestic violence through a multi-pronged approach targeting sexually explicit images, AI, media and culturally-specific contexts.
Investment in sustainability will not only drive innovation in the clean energy sector, but also result in reduced energy costs for households. Investment in the SEC Centre of Training Excellence signals a commitment to building a skilled workforce crucial for Victoria’s transition to sustainable energy sources. With ambitious environmental goals, Victoria’s shift towards renewables is pivotal in achieving net-zero emissions. High-level investments in infrastructure and training initiatives not only foster sustainability but also generate employment opportunities, addressing the demand for skilled workers essential for maintaining a resilient energy ecosystem. Continued enhancements in TAFE courses will further support workforce readiness, mitigating potential labour shortages and ensuring the sector’s vitality for Victorian households and businesses alike.
An additional cost-of-living relief measure introduced for the upcoming year, targeted at alleviating financial burdens of Victorian households, is the one-off $400 School Saving Bonus. This will be accessible at the start of next school year to support every child in government schools, as well as eligible concession card holders at non-government schools with cost of activities and uniforms.
The Budget’s commitment towards policies that support the welfare, preservation, and justice for First Nations communities signify an important step towards rectifying historical injustices and empowering Aboriginal communities to shape their own futures. The extension of the Yoorrook Justice Commission, Australia’s first formal truth-telling process, is of note. Budgetary initiatives promise tangible benefits for Aboriginal communities, pivotal in advancing justice. Investments in education uplift future generations, empowering them for success. Protection of cultural heritage preserves identity and strengthens community resilience. Support for Community Controlled Organizations reduces interactions with the justice system and aids families facing violence while health programs address systemic disparities. Extension of the Yoorrok Justice Commission ensures ongoing truth-telling and reconciliation. Ethical health research guarantees respect and inclusivity, collectively fostering Aboriginal empowerment and justice.
The substantial investment in regional rail networks signals a positive step toward enhancing connectivity across regional Victoria, potentially bolstering access to employment, education, and healthcare while boosting local businesses. However, despite acknowledging the crucial role of regional areas in driving Victoria’s growth, the allocated infrastructure spending for these regions represents only a fraction of the total expenditure, with the majority directed to major cities as they struggle to deliver for a booming metropolitan population. Additionally, regional hospitals grapple with mounting deficits, raising concerns about potential amalgamations. This underscores the importance of robust financial oversight to sustain operational capacity and prioritize healthcare needs over expansion strategies.
Victoria’s budget prioritises emergency response and disaster relief, bolstering readiness for recurring crises like bushfires. While these investments strengthen essential services’ ability to safeguard communities, the allocation appears more reactive than preventative. Further emphasis on pre-emptive strategies could instead serve to build resilience and mitigate risk.
Finally, the fiscal balance of Victoria’s budget remains a concern regarding flexibility to fund other vital programs and initiatives. A continued reliance on property taxes will certainly test investor reliance and challenges the state’s aspiration to be a preeminent destination for real estate investors. Compared to last year’s forecasts, 2024-25 property tax revenue is budgeted to exceed revenue targets by some $670 million or 7.8%. The bulk of the windfall arises from land tax which sees the government pocketing an additional $464 million (including COVID Debt Levy) than initially forecast in 2024-25, with the balance made up from a 21% ($186 million) increase in the Fire Services Property Levy and an 173% ($69 million) increase in Windfall Gains Tax revenue. Amongst a backdrop of productivity concerns and structural budget challenges, there is little room for additional revenue to be found for the government. The current strategy to grow out of the budget challenge will be contingent on the success of education and training programs delivering the much-needed productivity improvements across Victoria, which will both reduce building and delivery costs and improve the tax base for the State.
