Victoria’s budget makes for grim reading. But you wouldn’t have known it from Daniel Andrews’ expression as he made an incredibly rare appearance at the annual media lockup to brief journalists.
The premier’s presence proved how high the stakes were for the budget described by the treasurer, Tim Pallas, as the most difficult of the nine he’s handed down.
Andrews made the rounds to each table, answering questions and explaining the government’s so-called “Covid debt repayment plan” to pay back the money it borrowed during the pandemic – estimated to be about $31.5bn.
The debt is only a small portion of the state’s total borrowings – heading for $171.4bn by 2026/27 – but has been described by both Andrews and Pallas as akin to a credit card debt that needs to be “paid off”. (There are no plans to repay “state-building” debt, which Andrews and Pallas have described as similar to a mortgage).
Their plan involves a hike on taxes paid by medium to large-sized business and investment property owners, raising $8.6bn over four years, while the government will save about $2.1bn by cutting up to 4,000 public service workers in the next financial year.
While denying he was engaging in “class warfare”, Pallas said it was only fair that “big business” and “landlords”, who “did better out of the pandemic than others”, contributed to the repayment efforts.
The opposition from business, employer and property groups was swift. They say the payroll tax increase will dissuade companies from doing business in Victoria, while the land tax increase will more likely than not be transferred on to renters, worsening the affordability crisis.
Both predictions remain to be seen. But it could be argued these groups’ complaint of being made to feel like “cash cow” by the Victorian government may have some truth.
This is not the first time the government has targeted taxes at specific groups to help fund reforms. In this budget, overseas investors and private schools are also hit, while previously they’ve targeted members of Melbourne’s elite men-only clubs, property developers and people with homes worth more than $2m. (How many of these groups have members that would vote Labor?)
In 2021 the government announced a mental health levy, which was targeted at the same businesses that will soon be paying the “Covid debt levy”. At the time, Pallas used the same argument for its imposition.
“Many big businesses have continued to profit through the pandemic – pocketing taxpayer subsidies along the way,” Pallas said in 2021.
Despite fierce opposition to the mental health levy, it passed parliament and it continues to generate funds for the beleaguered system.
It also did not register as a concern among voters during the November state election.
If anything, it could be argued that setting the stage for a fight between the government on one side and businesses and landlords on the other could prove popular with voters, particularly younger people.
Given it’s the first budget of four before the 2026 election, there is every chance that – like the mental health levy – it will be largely forgotten when Victorians next go to the polls.
However, the new levies will remain for 10 years – reminding voters of what they endured in 2020 and 2021, long after the pandemic has ended.
Cuts to the public service could also hurt as many as 4,000 Victorian families. While the government insists it won’t affect services, such a cut amounts to about a sixth of the workforce.
The lack of support for renters and first home buyers – who were hopeful of some stamp duty relief – is also glaring and is being capitalised on by the Coalition and the Greens, albeit for different reasons.
The opposition’s shadow treasurer, Brad Rowswell, has dubbed the new land tax a “tax on renters”, while the Greens are calling for bolder wealth redistribution measures to fund more public and affordable housing.
“They’ve only done half the job and make no mistake should the budget get back into surplus [it] will be off the back of workers,” Greens MP Sam Hibbins said.
There is also a risk for the government that the economy could get worse by 2026.
Budget papers state the risks to Victoria’s economy are “greater than normal” due to high inflation, rising interest rates, weakening national and global demand, the war in Ukraine and bank collapses in the US and Switzerland.
But with reports Andrews is planning to leave before the end of his term, and that the treasurer is likely to depart at the same time, that may be someone else’s problem. In that light, the premier’s visit to the budget lockup has even more significance.
