This year’s budget has been delivered as the “Putting patients first” budget, with key measures to support a continuingly stretched public health sector. Two years on from the COVID-19 pandemic, the State Treasury has returned its focus from immediate support for small businesses to healthcare and transport projects.
Key budget measures announced
Remarkably, this year’s expected budget spend of $22 billion is even higher than 2021-22 ($19 billion), with $12 billion of total budget funds being allocated into the healthcare sector. Coupled with this however will be the increase in debt-funded capital spending which is expected to rise beyond previous expectations — and Net Debt projected to reach $167.5 billion by June 2026.
Although there were no new major infrastructure projects announced, Standard and Poor’s rating agency observed that the pipeline of existing projects is already “packed” and will compound the current budget deficit despite the economic recovery to date which has exceeded initial expectations.
The State Government forecasts rising revenues from land taxes to support its ongoing spending as residential property values remained firm in the early part of 2022, and anticipate land taxes to grow at an average of 7.2% per year over the forward estimates. Conversely, it’s expected that whilst land transfer (stamp) duties will rise, they will be tempered by a moderating property market and the threat of interest rate rises putting a dampener on property sales and overall housing prices. Payroll taxes are also expected to rise 6.5 percent as a result, driven by a stronger than expected outlook for the local labour market.
Economic growth is forecast to increase by 3.25 percent in 2022-23 after an expected growth of 5.50 percent this year (after two years of zero or negative growth) as the economy bounces back from COVID lockdowns and easing of restrictions, whilst unemployment is predicated to remain stable at 4.00 percent next year.
After the extensive financial support and state tax reductions and deferrals that occurred during 2020 and 2021, this year’s budget is a modest reflection of a recovering economy, without the big cash splashes that have dominated the pandemic years.
Power Saving Bonus
The big media focus has been on the $250 million support package to ease the cost of living burden on Victorians. The scheme will include a once-off $250 payment for all Victorian households that use the Victorian Energy Compare (VEC) website – the Victorian Government’s independent price comparator website – to search for the cheapest electricity deal. The scheme will commence 1 July 2022 and run for 12 months through to 30 June 2023. The State Government estimates that the average household can save up to $330 on energy bills annually from comparing providers using their platform and switching their retailer or plan. Households that have previously claimed a $50 or $250 Power Saving Bonus will still be eligible for this new one-off payment.
Also announced was a boost to the Solar Homes Scheme, making $42.2 million available for 64,000 Victorians to take up solar panel rebates and zero-interest loans, while continuing the current rebate value of $1,400, and further funding for 1,700 new solar battery rebates of $2,950.
Affordable and Social Housing
In October 2021, the Government also launched its $500 million Victorian Homebuyer Fund, a shared equity scheme to assist with the purchase of a home. This year’s budget promises a further $1 billion in low interest loans and government guarantees to community housing agencies to deliver social and affordable housing, expected to create up to 6,000 new social and affordable houses.
Key budget measures for business
Sick Pay Guarantee Pilot
Measures initially announced in March 2022 to support casual and insecure workers in selected industries who do not otherwise receive sick or carer’s pay. More than 150 000 Victorians with insecure work in eligible occupations will be able to participate in the pilot, with the Government providing up to five days’ sick or carer’s pay per annum at the national minimum wage.
Occupations covered in the first phase of the pilot include hospitality workers, food trades workers, chefs and kitchen hands, supermarket and supply chain workers, retail and sales assistants, aged and disability care workers, cleaners and security guards.
Victorian Industry Fund
A $120 million Victorian Industry package to support sovereign capability, advanced manufacturing, attract business investment, build supply chains and support small business and employment. The fund prioritises strategically important areas including health, defence, agriculture and renewable energy while helping to reach the Government’s Jobs Plan target of creating 400,000 jobs by 2025.
The package includes:
- $40 million in grants over two years to help fast-growing companies expand further through the Victorian Industry Investment Fund – supporting companies in key sectors like health, food production, technology, advanced manufacturing and business services to develop more products, create jobs and boost sales.
- $40 million International Investment Attraction Fund encouraging forward-thinking global firms to set up in Victoria, creating local jobs, boosting Victorian manufacturing and supporting new opportunities for local businesses to grow and develop.
- $20 million Equity Investment Attraction Fund – a pilot program to attract and retain high-growth companies by providing funding in return for an equity stake.
- $4.5 million to fund 300 Digital Jobs for Manufacturing internships to train the Victorian workers supporting these industries.
Other measures announced
- The establishment of the Build-To-Rent (BTR) sector. BTR projects being large-scale residential developments where the properties are held and managed by a single entity to be rented out over the medium to long-term, providing greater security of tenure. From 1 January 2022 until 31 December 2031, eligible BTR developments will receive a 50 percent land tax concession for up to 30 years and a full exemption from Absentee Owner Surcharge over the same period.
- $1 billion in low interest loans and government guarantees to community housing agencies to deliver social and affordable housing.
- $2.6 million investment to attract a pipeline of national business events to Melbourne and regional Victoria, and a further $4.4 million events recovery and support program to re-establish Victoria’s calendar of world-class events.
- From 1 July 2022, the sale or transfer of wheelchair accessible commercial passenger vehicles that provide unbooked services will be exempt from motor vehicle duty, by encouraging investment in wheelchair accessible transportation. The exemption will only apply to the sale or transfer of eligible vehicles that are less than two years old.
- $383 million provided for additional train services across the state and to operate new transport infrastructure that is being delivered as part of the Big Build, including level crossing removals, rail extensions, train station upgrades and road upgrades, and $109 million to improve Victoria’s suburban and regional bus services and bus stops.
- $88 million to increase the teaching workforce and support schools to hire more vocational teachers and support staff, $86 million to introduce an expanded offering of vocational and applied learning pathways and certificates in government secondary schools, and $69 million to expand state-wide the Head Start school-based apprenticeship and traineeship model for students to complete their senior secondary certificate while progressing towards a qualification.
- $135 million provided to continue necessary support to Victorians with disability who are not eligible for the NDIS.
- $400 million in programs and services to support and assist Victoria’s Aboriginal community.
- $2.6 billion to prepare for the Commonwealth Games in 2026, to be hosted across Victoria’s regions – with regional hubs in Ballarat, Bendigo, Geelong and Gippsland.
This year’s state budget, with its focus on social and healthcare measures, will be a challenge for businesses who have become accustomed to regular stimulus and financial support over the past two years. The positive that businesses can take away from the announcements is that no new charges on increases in taxes have been announced to assist the State Government in funding its continuing spending or to reduce the expected debt arising from previous and new spending announcements. We expect this to be a year of consolidation as the economy emerges from strict pandemic measures and looks to find its feet again, ensuring that businesses can once again become self-sustaining into the future.
We are here to partner with you to navigate the challenges the next 12 months presents. Please contact your advisor to discuss your situation or contact us via the general enquiry form.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.