Thursday, 22 June 2023

Budget papers 2023–24

Second reading

Debate resumed.

Bev McARTHUR (Western Victoria) (14:02): I rise to speak on this appropriation bill, the Treasurer’s ninth. Like any good series, it builds on the previous episodes, and there has certainly been a constant theme in Mr Pallas’s output. Yet again taxes rise and spending rises, and hardworking Victorians get hammered. The Treasurer boasts of increased revenues as if that is a good thing, but the rise from $83 billion this year to $89 billion next year is $6 billion taken from businesses and taxpayers. This budget reveals government revenue will hit $99.9 billion by 2026–27. We will soon be the hundred-billion-dollar state – nothing to be proud of. And where is Mr Menzies when you need him? He would never have had a budget like this.

For me, the biggest headline from this budget, however, is that Victoria is broke. It is alarming – every single day Victorians will fork out $22 million in interest repayments alone before we even start to pay back the still-rising debt. After every budget in the last Parliament I warned about reckless spending, government expansion and poor project management. It is now on steroids, that whole episode. In fairness, this is the budget where Labor have finally noticed. Sadly, I think the worst is still to come. This budget holds as much water as Geelong’s promised new swimming pools will after the Commonwealth Games – blow-up ones, portable. Why do I say that? Well, the tax rates and charges hikes are real, but despite the much-hyped 4000 public service jobs cuts, Victoria’s public sector wages bill will actually grow from $35.3 billion in 2023–24 to $38.3 billion in 2026–27. In fact, instead of cuts, this government will build the bureaucracy by 59,000 with the Lazarus-like resurrection of the SEC.

There are some real cuts, however. Health spending, for example, is down $1 billion from this year to the next, following a $2 billion cut just last year. Regional roads – a $250 million cut, now 45 per cent down since 2020. Regional development does not escape – halved from $211 million to $106 million. Agriculture loses more than a third, from $687.3 million to $454.8 million.

And what about the taxes? I was particularly taken by the Treasurer’s laughable attempt to say we are the least taxed state. We know the Victorian Chamber’s post-budget lunch is a lighthearted affair, but he must have been seriously short of comic material to try that line. Two years ago I said of the Treasurer’s earlier effort:

This is a budget which finally buries the Education State and heralds the taxation state.

Clearly I should have waited. The ideological attack on independent schools recently announced really underlines this. If we want less of something, we tax it – and so it is with parental choice and independent education, which are really in the firing line here.

Speaking of ideology, landlords – even mum-and-dad investors, like certain Labor ministers, no less ‍– have copped it. Many of these landlords do not own the homes they rent; they pay a mortgage which has been hit by interest rate rises their tenants do not pay. They also pay rapidly inflating costs of maintenance, real estate fees, landlord insurance, VCAT fees if things go wrong, and now land tax and rate rises. They paid stamp duty when purchasing the property and will pay capital gains when they sell. Many did not raise rents during lockdown. Some even froze payments to help renters who had lost income. Landlords pay these costs. They carry the risk, and they face an increasingly bewildering, backbreaking burden of new government regulation, which at any time might escalate. In the same cynical way that Daniel Andrews tried to describe not-for-profit charitable educational schools as businesses to shift the outrage at his government’s tax attack, he took a swipe at supposedly rich, exploitative landlords. He wants Victorians who rent to blame their landlords when their rent rises. These costs and risks mean nothing to him. ‘Claim it off your tax’, he says. Thanks, federal government.

The truth is landlords are not the reason for the housing crisis. They are not the reason renters’ costs are rising. We cannot and will not allow Labor to shift that blame. I might mind less about the vast tax burden, the degrading of our competitiveness and the damage to our economy if I felt confident the money would be well spent, but it will not be. It never is and never has been under this government. The Treasurer manages to rake in ever higher revenues – $6 billion more in this bill alone, and yet simultaneously sets us on a course to a record debt of $171 billion. ‘How has he managed it?’ one may well ask. The only explanation is truly epic levels of public spending, spending which we know, on this side of the house at least, will not create one single sustainable job. This is a government which spends other people’s money – badly, I might add – then puts its hand out for more.

And who pays? This economic mismanagement was avoidable stupidity, but it is Victorians who will bear the brunt of Daniel Andrews’s mistakes – in increased taxes and cost-of-living pressures and in cancelled infrastructure projects. The truth is, as this budget shows, whatever Labor says Victorians pay, whether it is big or small business, mum-and-dad investors, wage earners or consumers and now parents of children at school, we are all paying for their mistakes. We knew about the business-wrecking WorkCover jack-up, but rent hikes caused by slugging landlords, rate rises and increased school fees can only slash economic recovery. I have heard much of this justified by government members here as temporary. Well, as you know, nothing is so permanent as a temporary government program.

Even before the impact of this budget kicks in, the earlier destruction of our competitive economic environment is being felt. It was deeply concerning to learn today that Ford intends to axe a quarter of its entire Australian workforce, with the majority of the 400 job losses coming in Geelong. The budget does nothing to stop other companies choosing to leave and go elsewhere; in fact it makes it worse. So many companies are choosing to leave this state because we are totally uncompetitive to operate in.

We hear encouraging words, but it is plain what a Daniel Andrews promise to regional Victoria looks like. The budget papers are clear. The Geelong fast rail is stuck in a non-existent station, with no spending committed in this budget period and no completion date. The only thing ahead of schedule is the axing of Victoria’s timber industry, with the job-destroying, foreign-import-promoting ban on native timber brought forward from 2030 to 2024 to appease inner-city environmentalists and those people sitting over there who have no nuanced understanding of the industry. How does anyone expect to build the housing revolution without timber? How does anybody expect all those fabulous people in the Gippsland area who work so hard in the timber industry to become baristas? It is a monumental disgrace that you buckled under to the extreme-left environmentalists to win yourself some votes.

In fact the only regional issue this Labor government is truly addressing is the workforce shortage. Cancelled infrastructure projects, heavy business levies and wallet-busting tax rates and charges will trash our economy. There is no workforce shortage if there are no jobs at all, and if they are all coming from the public sector then who is paying: that declining number of taxpayers that are left in the system. Long after the short-term laugh the Treasurer gained for his ‘least taxed state’ line has died, the consequences of this bill will be felt. On this side we will be working even harder to ensure there are no more sequels to Pallas part 9. We will have an alternative ready to go, an alternative based on a basic and cherished principle, and I quote:

… the prime duty of government is to encourage enterprise, to provide a climate favourable to its growth, to remember that it is the individual whose energies produce progress, and that all social benefits derive from his efforts.

That is everything which is missing from this budget, and it is everything the Liberal Party stands for. It is not a fully fledged policy – that of course is for us to develop. But it is a principle and a promise to all Australians that we believe in them, not in government. I am sure Dr Bach does not need me to spell out just who wrote those inspirational words.

David DAVIS (Southern Metropolitan) (14:13): I am pleased to rise and make a contribution to this budget debate. This state budget follows a trail of increasing debt, increasing tax and increasing impacts on the cost of living for everyday Victorians. This is a budget of high tax, it is a budget of increased debt, it is a budget of increased borrowings. I am very concerned about the impact of this budget on the Victorian community. I am very concerned about the impact of this budget on small businesses. The Victorian Chamber of Commerce and Industry has been very clear about the impact of this budget on small businesses, and that builds on its work assessing the regulatory and taxation impacts of the state government’s regime that was in place prior to this budget and through it.

I want to say first, though, that the state government promised in 2014, they promised in 2018 and they promised again in 2022 that there would be no new or increased taxes. On each occasion they made methodical and clear promises. The Premier famously, on election eve in 2014, indicated to Channel 7 that there would be no new or increased taxes – the then opposition leader, as he was. In 2018 Tim Pallas and the then Premier Daniel Andrews made a statement in the last week before the campaign. They reiterated their ‘No increased taxes’ promises, which have been breached so extensively – 49 times now in fact new taxes have been introduced or increased. It is an extraordinary record of lies and deceit that has been put in place by this government.

In the week before that election in 2018 they promised they would increase the state debt from 6 per cent of GSP to 12 per cent of GSP, and we know the rest and the history of what has happened since then. The state saw a surge in debt in that 2018–19 and 2019–20 period as the cascading impacts of the major projects landed – more and more cost overruns, more and more massive blowouts impacting the budget bottom line and the state’s debt. Whether it be the Metro Tunnel at $3 billion to $4 billion; whether it be the West Gate Tunnel, which is delayed and massively over budget; or whether it be small projects such as the Mordialloc bypass or the Victorian Heart Hospital, which went from $150 million to $577 million nearly nine years after it was promised and was five years late, there are massive increases in costs. These increases in costs have been reflected in the budget through borrowing, largely. The state government has taken the money that it got from the contracting out of the port. They have taken the money that they have got from the decision on registration and so forth and they have used that money. Effectively that money has been leached out the door on these cost blowouts and these shocking outcomes for the Victorian community.

Michael Galea interjected.

David DAVIS: We all agree with investment in infrastructure, but nobody agrees with the cost blowouts on the infrastructure. When you take a project like the metro at $9 billion, that is one thing, but when it is nearer to $15 billion, you start to scratch your head and ask, ‘Is that a good deal? Have we managed the project properly? And what have we got to show for a $4 billion, $5 billion or even $6 billion blowout?’, which is the likely outcome in the end. The heart hospital at $150 million is a good project – we are in favour of it; we announced it first – but is it the right outcome that it is $577 million and five years late? Nobody thinks a five-year delay and an increase to $577 million is what should have occurred. It should have been managed properly from the start, and that is true right across the whole of government. The debt is heading for $171 billion in the period at the end of the budget estimates – massively up.

What I want to do now is just step the chamber through a number of tables. These tables were compiled directly from budget documents. They are similar to the ones I incorporated last year. I have spoken to the Leader of the Government, to the President and also to Hansard, all of which confirmed there is no difficulty incorporating these documents.

The DEPUTY PRESIDENT: Mr Davis is seeking to incorporate material into Hansard. I understand that he has provided material to the President and the President is satisfied that it meets the terms of standing order 12.15 for incorporation of material into Hansard. Is leave granted for incorporation?

Leave granted and material incorporated at page 2154.

David DAVIS: I should say that there will not be colour in Hansard. It will just be black and white. If you want to see it in colour, you can look at my website, but otherwise you will have to look at it in black and white. If we step through these charts, they make some very clear points. The borrowings go from in 2014–15 a very modest level, comfortably below $50 billion, to by 2026–27, at the end of the forward estimates, $210.7 billion. That is Victoria’s borrowing. If you look at the annual interest bill, you can see the surge, the increase, coming through the period.

I just want to knock one thing on the head – this idea that it is all because of COVID that we are borrowing. It is absolute bunk. It was a deliberate decision of the government to surge up the borrowing from 6 per cent to 12 per cent of GSP, and 12 per cent is a very low number now compared to what we are actually going to head to. What I would say is that the decision there is given the lie by the fact that on 31 December 2019 the state budget was in clear and significant deficit. I will make it clear to everyone: 31 December 2019 is a BC date – before COVID. That surge in debt had already begun. The set and forget on the major projects had already commenced. The heart hospital that I referred to before already had committed $577 million, up from $150 million. It is listed as $577 million, but it is not yet fully open and functioning. My point is that all of that debt is due to the mismanagement of major projects. Of course there was borrowing in COVID, of course there was debt in COVID – even some of that was mismanaged – but even allowing for that, the huge surge in debt comes from the major projects and the overruns.

If you look at the annual interest bill in the next chart, you will see the huge surge in the interest bill. If you look at the tax revenue in the chart above – of course Victoria gets much of its revenue from other sources, some through charges and so forth for services but some of it from the Commonwealth ‍– the huge surge in tax is shown very clearly, from well under $15 billion to well over $40 billion estimated for 2026–27. That is a huge increase in total tax revenue. When you look at the land tax revenue, you can see the surge in land tax revenue that is put out in these tables – and this is straight from budget papers over the period – and you can see the massive increase in land tax revenue. All of that is hitting small businesses. It is hitting families and it is hitting small businesses, and it is hitting them very, very hard indeed.

When you look at the land transfer duty, you can see in the budget estimates that there is actually a fall this year from a peak of nearly $10.4 billion down to just over $8 billion, but if you look at the trendline, you can see the trendline right through and going up to almost $9.4 billion in the 2026–27 period. Land transfer duty – massive increases and a widening of land transfer duty. I predict that the numbers in the budget will underestimate what is collected. They have dropped the threshold, and they are clobbering a huge range of additional people with land tax. The land tax scales have not been properly adjusted again, so they are clobbered and clobbered and clobbered. This directly hits small business; small business is suffering very significantly.

The payroll tax increases have been discussed heavily in this chamber. Those who have made provision for their retirement through rental properties and so forth will be hit very hard – sorry, that is on the land tax. On the payroll tax, there will be a huge hit not only through the schools but through a whole range –

Georgie Crozier: Aged care.

David DAVIS: I am just about to get to aged care as well. We have discussed the schools at length in this chamber. The hit on the small and struggling private schools is going to be very significant. When did anyone think it was a good idea to put a tax on education? When did anyone think it was a good idea to tax aspirational parents? The schools will be forced to pass through most of the cost – or some of it may be absorbed by a reduction in teacher numbers and a reduction in staff numbers. There is a failure of the government to understand the scale of this and the fact that the new thresholds are cutting in. The thresholds, at $10 million and $100 million, are both very significant and are leading to much increased revenue in payroll tax but are also making Victoria less competitive.

Ms Crozier mentioned aged care. Those aged care providers are going to really feel the pinch here. They are going to hit those thresholds and they are going to have more payroll tax to cope with because of these changes made this year, and that is going to hit directly the viability of aged care providers.

A member: You’ve finally noticed aged care, have you?

David DAVIS: I tell you what: older Victorians who are in aged care are going to be very, very unhappy.

Members interjecting.

David DAVIS: You just want to hit them, you want to clobber them. Why do you want to hurt them so much? Why do you want to actually force this through?

Members interjecting.

David DAVIS: Are you saying Regis and Bupa are not providing good care?

A member: I just said ‘good pay, good care’, thank you very much.

David DAVIS: So you want a good tax.

The DEPUTY PRESIDENT: Order! Can we just have the debate through the Chair. Mr Davis has the call.

David DAVIS: What I would say very clearly is the tax that has been put on aged care is going to be passed through to those who pay for the aged care. The Commonwealth at the moment are actually trying to support aged care providers. They are trying to put in place better arrangements, they are trying to put in better supports, and the state government is scooping the money out on the other hand and that will impact directly on the quality of service. You cannot take that money out without having an impact. It is going to be reflected in higher fees for those who are in aged care, older and vulnerable Victorians, or it is going to be reflected in a lower standard of care. I say the payroll tax increases are huge and are going to cause tremendous trouble for many of these sectors over the period ahead.

Industries in Victoria that compete with other countries and other states are going to face real challenges as these higher payroll tax thresholds are implemented. It is going to be very difficult. The net debt chart makes it very clear where we are headed, and you can see from these charts the enormous surge in debt up to an estimated $171.4 billion by 2026–27. Victorians are beginning to become increasingly concerned about that debt. As we know, it will be greater than Queensland, New South Wales and Tasmania combined by the end of the budget estimates period. Three states combined will have a debt lesser than Victoria’s at the end of that period, when we reach a terrible outcome of more than $170 billion. If you look at the net debt to gross state product chart, you will see the surge in debt kicking off in that 2018–19 year, really surging through there to 2019–20 and beyond.

Be again very clear: this is not mainly COVID debt. This is mainly debt from blowouts in infrastructure projects, projects that have been improperly, poorly managed with poor cost containment, and the projects just blow out. We know more than $30 billion in cost blowouts from these projects has gone straight onto the budget bottom line, and that is where much of the debt is coming from. Net debt to gross state product is a very clear measure of the outcomes, and we should understand that this is going to crimp Victoria’s future.

Finally, I want to draw the chamber’s attention to a chart of projected net debt in the Australian states. Looking from 2018–19 and beyond, right up to the end of the forward estimates, you will see Victoria sadly rockets ahead in the scale of our net debt compared to any other jurisdiction in the country. It is not a coincidence that we have got one of the most incompetent governments, a government that is addicted to debt, a government that is going to hurt Victorians, a government that is not able to control and taxes the other side of the equation as it scoops in more and more tax.

Motion agreed to.

Read second time.

The ACTING PRESIDENT (Bev McArthur): Pursuant to a resolution of the Council of 20 June 2023, further debate on the motion to take note of the budget papers will be adjourned. The bill will now be considered in committee of the whole.

Committed.

Committee

Clause 1 (14:30)

Matthew BACH: Attorney, just a few questions from me. Attorney, the budget papers reveal that even with the appropriations proposed the net debt to gross state product increases from 20.6 per cent in the current fiscal year up to 24.5 per cent in 2026–27. Can the government guarantee that Victoria’s net debt to GSP ratio will peak at that point, at 24.5 per cent?

Jaclyn SYMES: In relation to debt I think I just would like to begin by reference to the fact that the government certainly used its balance sheet to support businesses and families in relation to the unprecedented events involving COVID. What I can tell you is that if it had not been for the pandemic, we would have had surpluses every year. That is our record. We delivered consecutive surpluses in the past. The pandemic meant obviously that we lost our AAA credit rating, which increases the cost of all our debt. It also means that we are servicing $31.5 billion more debt than we otherwise would have been servicing, so that obviously affects our operating result. We have a cash surplus every year over the forwards, and a higher cash surplus from these measures means government needs to borrow less to fund its infrastructure program, for example, returning debt to where it would have been by 2033. That is what is anticipated in relation to those time lines.

Matthew BACH: Attorney, you mentioned our credit rating. Have you been advised on any pending updates to credit ratings from S&P or Moody’s?

Jaclyn SYMES: I have not. But I will ask if there is any update from the box.

Following the budget, S&P noted that the fiscal outlook is improving and provided headroom in our AA rating. Moody’s, which has also maintained our rating, expressly pointed to the intrinsic strength of the Victorian economy relative to many of our global peers.

Matthew BACH: Back to the issue of our net debt to GSP, the budget says that net debt to GSP will stabilise in the medium term. That is the expression that is used in the budget papers. Is it possible to have a definition of ‘medium term’ – how many years, within what period?

Jaclyn SYMES: ‘Medium term’ is not specified, Dr Bach, but net debt to GSP almost stabilises at the end of the estimates, which is the government’s goal.

Matthew BACH: That is very clear. I appreciate it. Regarding the view of different ratings agencies – and I thank you for those comments – I am aware of some other comments that have been made. I am sure that work has occurred in the Department of Treasury and Finance regarding the impacts of any future downgrades, notwithstanding the comments that you made before, and I accept those comments. So I ask: according to any work that has occurred, and I am sure it has, in the department of Treasury, what impact will further downgrades in the state’s credit rating have on net debt and also on annual interest servicing costs?

Jaclyn SYMES: Dr Bach, it is a hypothetical that you are raising, but the interest expense is based on the assumptions in the estimates. I cannot give you much more of a forecast in relation to what will happen in the future as the way that you have outlined your specific question.

Georgie CROZIER: Attorney, in schedule 2, ‘Attributable to COVID-19’, page 30, Treasury and Finance, there is ‘Hotel quarantine costs – interstate reimbursement’ of $11,830,082. Could you provide to us where those hotel quarantine costs were – which states they were – just a breakdown?

Jaclyn SYMES: I am advised that we do not have that information.

Georgie CROZIER: In relation to schedule 2, page 26, the ‘Alternative quarantine accommodation hub’, could you just provide a description of what that is for me?

Jaclyn SYMES: I am prepared to say it is Mickleham.

Clause agreed to; clauses 2 to 9 agreed to; schedules 1 and 2 agreed to.

Reported to house without amendment.

Jaclyn SYMES (Northern Victoria – Attorney-General, Minister for Emergency Services) (14:38): I move:

That the report be now adopted.

Motion agreed to.

Report adopted.

Third reading

Jaclyn SYMES (Northern Victoria – Attorney-General, Minister for Emergency Services) (14:38): I move:

That the bill be now read a third time.

Motion agreed to.

Read third time.

The DEPUTY PRESIDENT: Pursuant to standing order 14.28, the bill will be returned to the Assembly with a message informing them that the Council have agreed to the bill without amendment.