Report by Willow Aliento, with Tina Perinotto

8 May 2014 – Victoria, the richest state government in Australia thanks to massive cuts to environmental and other programs – has delivered a surplus while others gnash their teeth over deficits.

In doing so it’s fallen into line with the anti-climate anti-sustainability rhetoric, with environmental programs taking the biggest cuts.

In the view of one person in the lock-up for the Victorian budget, the greenies sharing the lock up weren’t happy. His view was that, “Oh well they’ve had it good for 10 years – now it’s infrastructure’s turn.” As if sound rational sustainability and climate outcomes are somehow at odds with good economic performance, instead of totally aligned if you look just a tad beyond this quarter’s earnings report.

The budget in fact cut departmental environmental policy by $19 million, or 34 per cent – the biggest single cut across government, according to analysis by Environment Victoria, and funding environmental programs was cut by $46 million or 25 per cent on last year’s budget.

But the overall result was a mixed bag, judging by reactions from environmentalists (bad, with some tiny bits of good) property industry (bad and good) and engineering sectors (good).

A tick on public transport, or not?

Commendable news at first blush was a commitment to public transport, though delivery of this is set to be slow.

The announcement was for $830 million over the next four years allocated for two projects, the new Melbourne Rail Link between South Yarra and Southern Cross station, with new stations at Domain and the major urban regeneration area of Fishermans Bend; and a new rail link between Southern Cross station and the Melbourne Airport.

Combined cost of the two rail projects is estimated at between $8.5 billion and $11 billion.

Victorian planning minister Matthew Guy said the Melbourne Rail Link would deliver high frequency rail services to meet the needs of Melbourne’s growing population.

Royal Melbourne Hospital, desperate for public transport

But did the government actually deliver what was wanted?

The previous Melbourne Metro Rail project had a tunnel running under Swanston Street with five new stations, including at North Melbourne and Parkville.

The University of Melbourne and Royal Melbourne Hospital were not pleased with the announcement.

University of Melbourne transport expert Chris Hale told The Age it was a disaster, and had been done with no consultation.

“What we need for Melbourne is close to the original concept, especially a station at Parkville, which is an important employment destination with hospitals and the university that has had so much investment put into it over the years,” Dr Hale said.

RMH chief executive officer Dr Gareth Goodier said car parking was at capacity in Parkville and with the Victorian Comprehensive Cancer Centre opening in 2016, public transport for patients and staff were vital.

The Fishermans Bend station is viewed by many as key to the success of the urban renewal project, which is one of the largest underway in Australia, and comprises 240 hectares with a plan to accommodate more than 40,000 people in a mix of low and medium density housing, in addition to retail, commercial space and services creating 25,000 jobs.

Fishermans Bend, lost somewhere near the casino

However, Opposition leader Daniel Andrews said the Fishermans Bend station was nowhere near Fishermans Bend, and closer to the Crown Casino.

“Apparently a Fishermans Bend station where no one lives won’t be in Fishermans Bend,” Mr Andrews told reporters.

“To build stations where no one lives at the expense of stations where hundreds of thousands of Victorians come to work and visit every single day does nothing to improve public transport.”

The proposed station for the Montague precinct of Fishermans Bend, located near the South Melbourne market and the Melbourne Convention and Exhibition Centre, is pegged as servicing both Fishermans Bend and also the growing Southbank community.

Other elements of the Melbourne Rail Link Plan include:

  • twin 7.5 kilometre tunnels from Southern Cross to South Yarra
  • a new underground station at Domain
  • new underground platforms at Southern Cross and South Yarra
  • train-tram interchanges at Southern Cross, Montague, Domain and South Yarra; and a rail link to Melbourne Airport

Bushfires, floods and scraps

Also among the budget numbers, set to deliver a surplus of $1.3 billion for 2014-15, were funds for bushfire and flood prevention, though it seems “climate change” is the thing that cannot be named.

Modest funding was allocated for some green programs, but the key word is modest –or “scraps” if you ask EV – and strictly in environmental areas that would be certain not to challenge the fossil fuel industry too much, not keep them tossing in their beds as they await the end of the Stone Age.

The list of green programs included:

  • $6.2 million to fund an illegal dumping strike force to stamp out industrial dumping
  • $3.2 million to establish the Yellingbo Conservation Area to protect threatened species, including the Leadbeater’s Possum and Helmeted Honeyeater
  • $5.5 million for practical on-ground partnership with Landcare groups to identify and restore local environment projects
  • $4 million to eradicate weeds through the Urban Fringe Weed Management program
  • $3.4 million to monitor for marine pollution
  • $9 million contribution to the Murray Darling Basin Authority
  • $13.35 million to build new National Park facilities and undertake maintenance work

These initiatives come after the Coalition spent its first term slicing major environmental and sustainability programs, including the recent axing of the Greener Government Buildings Program, which is now trying to re-invent itself under department-specific initiatives that will be harder to get across the line and more expensive.

Acting chief executive of Environment Victoria, Mark Wakeham, was not at all impressed with the budget. He said the initiatives were “small scraps” and said, “This budget is sending us in the wrong direction.”

$15.4 million to clean up after the Hazelwood power station fire at Morwell

Coal is a winner

The coal industry did reasonably well considering that it costs so much.

It won $4 million to support development of the brown coal industry.

But more money needed to be allocated for cleaning up its cost, with Victorians asked to foot a $15.4 million clean up bill for the Hazelwood power station minefire, after the government scrapped plans to begin the retirement of Hazelwood power station in the first weeks of its term.

The ordinary taxpayer was also asked to chip in and help find more coal with a $15 million contribution towards co-funding mining exploration.

Mr Wakeham said that under the exploration co-founding, taxpayers will literally foot the bill for the state government to hire drill rigs and excavators to dig up Victorian farmland.

Bad news was also clear on clean energy.

“There is no new funding for renewable energy projects, energy efficiency is also not mentioned and Victoria no longer has a climate change policy,” Mr Wakeham said.

Broken promises on housing efficiency

“In 2010 the Coalition made an explicit election commitment to improve the average efficiency standard of Victorian homes to 5 stars, from a current average of 2 stars. For the fourth successive budget the Coalition has ignored its pre-election commitment, consigning Victorians to higher utility bills and less comfortable homes.

“The 34 per cent cut for environmental policy is the single largest cut to any departmental output across the whole of state government, Mr Wakeham said.

“The government are putting money into the problem, not the solution,” and it confirmed the Napthine Government’s “negligent approach to environmental protection”.

Asked to rate the budget between one to 10 in terms of its sustainability credentials, with one being disastrous and 10 being terrific, Mr Wakeham said it would be a “one or a two”.

Bushfires

Victorian Minister for the Environment and Climate Change Ryan Smith said $21.6 million would be invested to further reduce the risk of bushfires faced by Victorian communities by funding Incident Management Teams to respond to emergency incidents across the State and better protect lives and properties.

Fire response will also be strengthened from upgrades to roads, bridges and airbases to support the state’s planned burning program and by modernising Victoria’s fleet of fire fighting vehicles, he said.

Mr Wakeham pointed out that while the minister did acknowledge the costs of both bushfires and flooding are increasing, there was no acknowledgement in either the budget speech or the fund allocations that climate change is a contributing factor and therefore should be addressed.

“The state government has dismantled the Victorian government’s policy on climate change [over the past few years] and said it was a federal responsibility [to address],” Mr Wakeham said, despite that the federal government appears unwilling to take up the responsibility.

[The Fifth Estate does however note the Minister’s title still includes “Climate Change”.]

“We can export that knowledge of how to build smarter buildings. Let’s invest in our strengths”, Asher Judah, Property Council, Victoria

Property industry calls for more investment in competitive advantage, not more taxes

The Victorian Property Council welcomed the budget’s combined $27 billion in infrastructure promises across transport and education, but it is strongly opposed to the proposal to raise an extra $17.1 million a year in revenue by adding an extra tax on large developments.

The budget has flagged a tax of $1.30 per $1000 in construction costs on all planning permits for projects with a construction budget of over $1 million. These funds will be used to cover the operational costs of the new Metropolitan Planning Authority.

Deputy executive director of the Property Council of Australia (Victoria) Asher Judah told The Fifth Estate that while the MPA is something the PCAV had strongly lobbied for, “there is no need to introduce a new tax to pay for it”.

“They are simply addicted to taxing property,” Mr Judah said. “We’re not happy, and they haven’t justified [the tax] in their budget. We have once again become [the state government’s] piggy bank.”

Mr Judah pointed out that currently the property sector contributed between 30 and 40 per cent of state government revenue, and was a source of world-class innovation in sustainable building methods.

He described the state’s building code, which is demanding in terms of energy efficiency and water efficiency, as “a competitive edge for the state”.

“We can export that knowledge of how to build smarter buildings. Let’s invest in our strengths,” he said.

Pointing out that car manufacturing still received high levels of state support, even though as an industry it is clearly in decline and unlikely to survive in the context of a global marketplace, Mr Judah commented, “Let’s invest in our future, not our past.”

From a development perspective, Mr Judah said the stage in the cycle at which the tax would be imposed was a bad one, as the planning approval occurs well before any income has been generated from the project. The tax therefore puts added pressure on developers and builders in terms of borrowings to fund the project.

Further, the tax adds another level of bureaucracy for local government, which will need to develop the systems to administer and collect the tax, and finally, will add to the price of properties, as the additional cost will inevitably be passed onto end users (buyers), as there is no room in narrow project margins to absorb it.

“There is going to be a whole lot of unnecessary red tape, and at the end of the day, it will achieve very little,” Mr Judah said.

The Victorian Property Council also claimed the government’s plan for new taxes via asset value capture mechanisms is likely to make investors nervous. AVC already existed in the form of land tax and local council rates, Mr Judah said, and any move to “triple tax” property value uplift would face fierce opposition from the industry.

“Over the next four years, tax revenue sourced from property will increase by over $2.3 billion. Increases in Stamp Duty, Land Tax, Fire Services Property Levy and the Car Parking Levy each reflect a growing and unhealthy addiction to property taxation.

“If Victoria is to be the best state to invest, manage and own property, the state’s property tax thresholds must become more competitive. The Property Council calls upon the Government to work with industry to devise a long term tax reduction strategy to achieve this goal.”

Parts of the budget the PCAV expressed a positive response to included the new Melbourne Rail Link, the spending of a further $500 million by July 2015 on the East West Link, and the extension of the public–private partnership model to new school projects in key growth areas.

“The Government’s continued embrace of public–private partnerships to facilitate essential construction and procurement projects will be well received by private investors and construction companies. The extension of the PPP model to new school construction in the growth areas will greatly ease the social infrastructure backlog currently undermining outer suburban liveability,” Mr Judah said.

A rosy budget for the engineering sector

Engineers Australia gave the Victorian state budget a positive reception, with Victorian infrastructure spokesman Professor John Wilson saying the commitment of funds to investment in infrastructure was good news for the engineering profession and the overall future of the state.

“With nationwide job ads for engineers sliding for 27 straight months, we’re now in a position where over 40 per cent of qualified engineers work in jobs outside of engineering. This $27 billion infrastructure spend will provide the sort of sustained investment that Victoria’s engineering and construction industries so desperately need,” Professor Wilson said.

“With infrastructure delivery being notorious for its boom/bust cycles, the long-term vision outlined in the budget is welcome news and signals that Victoria is serious about investing in a sustainable economic future.

“With the decline of traditional manufacturing operations across the state, it’s only this kind of major investment that will ensure Victoria’s future as a high-tech, high-value economy. Large-scale infrastructure investment will provide returns for decades to come and will guarantee that Victoria can effectively compete with advanced global economies.

“Engineers Australia is also pleased to see funding announcements for rural and regional infrastructure projects and creating a model for Victoria as a successful ‘State of Cities’. These valuable job-creating infrastructure projects will benefit a wide range of Victorian industries, and the engineering workforce is ready to deliver.”

Other budget items of note:

  • $9.2 million over four years for the Rural Council Planning Flying Squad to help progress development in regional cities by removing backlogs and cutting red tape
  • $12.3 million for kick-starting the delivery of regional growth plans for Geelong, Gippsland, Loddon Mallee North, Loddon Mallee South, Wimmera, Southern Mallee, Great South Coast, Central Highlands and Hume
  • $51.6 million to the Metropolitan Planning Authority over four years to implement Plan Melbourne
  • A further $11.2 million over four years to deliver key short term actions from Plan Melbourne including supporting local government delivery of major urban renewal sites; a local pocket park fund; and a 20-minute neighbourhood fund
  • $33.4 million for electricity, gas, water and municipal rate concessions to assist low-income households afford essential services
  • $4.7 million to upgrade the online energy price comparison tool, My Power Planner, which helps Victorians find energy offers for electricity, gas and solar
  • $65 million over three years for the Social Housing Framework to renovate and maintain public housing stock
  • $1.1 billion for social housing projects currently underway or in the pipeline. This includes a total $215 million in 2014-15 comprising $50 million expenditure on existing projects and $165 million for new projects. The Age reports that only 500 new social housing dwellings are being funded in this budget
  •  $73 million for the Latrobe Regional Hospital redevelopment, $14 million for the Boort Hospital redevelopment and $28 million for the new Barwon Health-North facility
  • $447 million to expand Victoria’s prisons, providing additional men’s and women’s prison beds across the State, including at Langi Kal Kal, Beechworth and the Dame Phyllis Frost Centre correctional facilities

The bottom line – the projections

  • The 2014-15 Victorian Budget delivers an estimated operating surplus of $1.3 billion in 2014-15, rising to $3.3 billion by 2017-18
  • Economy to grow by 2.5 per cent in 2014-15, rising to 2.75 per cent in 2015-16
  • Employment growth to strengthen in 2014-15, with the unemployment rate forecast to fall to 5.5 per cent by 2017-18
  • Net debt is forecast to be 6.3 per cent of Gross State Product (GSP) at June 2015, declining to 4.5 per cent by June 2018

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