Victorian State Budget 2022/23 Overview
1. Introduction Treasurer Tim Pallas handed down the Victorian State Budget on Tuesday, 3 May 2022. On behalf of members, Master Builders Victoria (MBV) attended the budget lock-in, and we are delighted to provide you with an overview of the budget and its impact on the building and construction industry. This is the Andrews Government’s eighth budget and has come out in an election year, with the State Election set to occur in November 2022. As such, the 2022-23 Budget is focused on a pandemic recovery plan with major investments in health and hospitals, as the pandemic placed unprecedented pressures on the Victorian healthcare system. Other key themes included investment in schools, regional infrastructure, mental health, and job creation. It is evident that, as our community transitions to a post-COVID-19 recovery, the State Government is seeking to reduce costs and address the budget deficit caused by the pandemic. Nevertheless, it appears that our state’s recovery process is progressing well, and the State Government has confirmed that it is working towards achieving a Budget surplus in the next four years. In a briefing to special interest groups including MBV, Assistant Treasurer Danny
Pearson reported that Victoria is in a strong economic position, with forecast growth of 3.25 per cent next year. The Victorian unemployment rate of 4 per cent is at an alltime low and it is forecast to remain around this record-low mark in 2022/23. The regional unemployment rate is even lower at 3.2 per cent – almost a full percentage point lower than the national average. This budget builds on the investment and work done during COVID-19 and aims to continue to support Victorians off the back of strong infrastructure spending in the 2021/22 budget. The State Government’s pipeline of transport and social infrastructure projects will continue to underpin high levels of investment. Government Infrastructure Investment (GII) is expected to average $21.3 billion a year, over the budget and forward estimates, reflecting a continuation of Victoria’s Big Build. However, one concern is that net debt is projected to be $167.5 billion by June 2026, lower in each year of the forward estimates than was forecast in the 2021-22 Budget Update. The Victorian Future Fund will be established by the State Government to manage the fiscal impact of COVID-19 and support the state’s debt stabilisation strategy.
VICTORIAN ECONOMIC FORECASTS (PER CENT) 2020/21 actual
2021/22 forecast
2022/23 forecast
2023/24 forecast
2024/25 projection
2025/26 projection
Real gross state product
–0.4
5.5
3.25
2.25
2.75
2.75
Employment
-1.1
3
1.75
1
1.25
1.75
Unemployment rate
6.2
4.25
4
4.25
4.5
4.75
Consumer price index
1.4
3
2.5
2.25
2.5
2.5
Wage price index
1.4
2.5
2.75
3
3
3
Population
-0.7
0.1
1.2
1.7
1.7
1.7
Sources: Australian Bureau of Statistics; Department of Treasury and Finance`
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Victorian State Budget 2022/23 – Overview
2. S ummary of issues relevant to the building and construction industry 2.1 F unding for Industrial Relations An additional $6 million of funding is being provided to continue the operations of Wage Inspectorate Victoria, as legislated under the Wage Theft Act 2020. The Authority’s wage theft compliance, enforcement and education activities will continue to assist in protecting workers from exploitation and recovering employees’ lawful workplace entitlements. MBV maintains the view that industrial relations issues such as wage theft should remain in the Commonwealth’s jurisdiction. This is a matter that Master Builder Australia continues to advocate for at a Federal level.
2.2 Occupational Health and Safety The State Government will also provide $2 million of grants to employer and employee organisations to support occupational health and safety and other training in the building and construction industry.
2.3 Building Reforms MBV is pleased to see that the State Government will spend $19.7 million on building reforms to secure Victoria’s economic recovery. The funding will be provided to the Victorian Building Authority to implement automatic mutual recognition, a national initiative to boost occupational mobility that will make it easier for interstate practitioners to work in Victoria. Additional measures will also be introduced to strengthen the building approvals process, including a risk-based targeted inspection audit program. The Office of the State Building Surveyor will receive more resources, including technical resources, for oversight of more complex buildings.
A Building Monitor will also be established, supported by staff from the Department of Environment, Land, Water and Planning, to improve the consumer experience by advocating for domestic building consumers and reporting on emerging issues. MBV has continued to advocate for a Building Minister to represent both industry and consumers, and we will continue to engage with the State Government to understand what these reforms mean for our industry.
2.4 Tax implications on the building, construction and property sector The Budget has revised the taxes on the building, construction and property sector which made up 52 per cent of the State Government’s taxation revenue in 202122. This year’s budget estimates that this dependence on property taxes will decrease in the 2022-23 financial year to approximately 47.5 per cent. MBV is pleased to see that no new taxes or increased taxes have been introduced in the 2022-23 Victorian Budget. MBV has continued to advocate to the State Government, on behalf of our members, the effects of taxing on housing affordability and our sector. With the RBA’s latest announcement to raise interest rates by 25 basis points to 0.35 per cent, all levels of government must address the structural reforms to address housing supply and affordability. The State Government acknowledged the variability of land transfer duties or stamp duty tax and the implications of forecasting taxation revenue. As such, MBV will continue to advocate for taxation reform to abolish stamp duty tax and replace it with a broad-based land tax. This will promote greater allocative efficiency in the economy.
Victorian State Budget 2022/23 – Overview
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2.5 Skills and Training MBV fully supports the $277 million investment into Victorian Certificate education (VCE) and Victorian Certificate of Applied Learning (VCAL), which provides a strong base to build productive pathways into our industry. The following initiatives from the Department of Education and Training will be funded in the 2022-23 budget include: $10.9 million for Head Start apprenticeships and traineeships for all State Government school students. Funding is provided to expand the Head Start school-based apprenticeships and traineeships model to all government secondary schools. This includes cluster directors, Head Start coordinators and learning leaders to support students and increase relationships with employers. Funding will also strengthen data capture, monitoring and compliance. $15.8 million for improved vocational and applied learning pathways funding is provided to support the introduction of the new VCE, Vocational Major and Victorian Pathways Certificate in 2023, and to champion vocational and applied learning pathways. This includes professional learning for government school teachers to implement the new curriculum, support to the Victorian Curriculum and Assessment Authority for assessment moderation and creating a student portal and support for nonschool senior secondary providers to transition to the new framework. $18.5 million for excellence in vocational and applied learning, professional learning programs and supported study pathways will support and expand the vocational and applied learning workforce, in particular the availability of suitably skilled and qualified VET teachers and trainers. Additional funding for jobs, skills and pathways coordination in government secondary schools will reduce the administrative and coordination burden on schools and build capacity for excellent programs,
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supported by an augmented model of regional support for vocational and applied learning. $4.6 million extension of the Primary Mathematics and Science Specialists initiative. Funding is provided to extend the Primary Mathematics and Science Specialists initiative to train an additional 100 government primary teachers as mathematics specialists. The State Government says 25 positions will be filled by rural and regional teachers. This will support pathways for students to take on careers such as engineering and architecture to support the building industry. $9.8 million in universal access to highquality VET for government school students. Funding is provided to support improved access to a core offering of Vocational Education and Training Delivered to Secondary Schools (VDSS) pathways and certificates. A revised funding model will reduce complexity and better reflect the cost of delivery. Local access planning will support place-based solutions and collaboration between cluster schools. The budget forecasts that this funding will increase to $24.2 million in the following year. $5.9 million investment in the Apprenticeship Support Officers Funding is provided to continue contemporary, targeted support for Victorians to finish their training through the Apprenticeship Support Officers program. The program provides dedicated support to learners most at risk of failing to complete their apprenticeship, including women. $7.1 million is provided to Skills Solutions Partnerships, a collaboration between the State Government, industry, TAFEs and dual-sector universities to pilot new training approaches that address skills shortages in priority areas, including short courses and work placements.
Victorian State Budget 2022/23 – Overview
2.6 Mental Health and Health Investment
2.7 New school construction
MBV welcomes the State Government’s investment in mental health and wellbeing for our community. We know that those working in the building and construction industry are more than 50 per cent more likely to take their own lives. Male construction workers aged 15-24 are more than twice as likely to take their own lives than the general population. Suicide in our industry is a significant issue that requires an industry-led solution.
MBV welcomes the State Government’s investment in new school construction, which gives our members opportunities to tender for the building and construction works across Victoria. The State Government will build 13 new schools, contributing to its commitment to open 100 new schools across our state by 2026.
MBV welcomes the State Government’s $2.9 billion investment to transform the healthcare system. The State Government is implementing the Royal Commission’s findings into Victoria’s Mental Health System, and it is a significant social reform. Given that our sector has one of the biggest suicide rates, we will continue to liaise with the State Government about how we can utilise some of the funding released in this Budget to benefit our members’ mental health and wellbeing. Other major investments in health infrastructure include: $0.9 billion - $1 billion for a new Melton Hospital, which will provide 24-hour emergency services and a range of clinical supports. $500 million - $525 million for the Barwon Women’s and Children’s Hospital in Geelong to expand services. $300 million for the Regional Health Infrastructure Fund to renew and update regional and rural health services. $236 million to expand the capacity of the emergency departments at the Casey Hospital and Werribee Mercy Hospital. $196 million to replace and expand the existing mental health facility at Goulburn Valley Health in Shepparton. Funding was provided to purchase land and undertake further planning to deliver more beds in Wangaratta and Ballarat/regional Victoria. $124 million to deliver supporting infrastructure, and better facilities at the Thomas Embling Hospital. This will provide our members with the opportunity to tender for these works across Victoria.
Twenty-nine mainstream schools across Victoria will receive funding for upgrades to improve educational outcomes and provide high-quality classrooms and facilities for learning and community use. Land will also be acquired in Cardinia, Casey, Greater Geelong, Hume, Melton, Whittlesea and Wyndham for future new schools.
2.8 Infrastructure and regional investment MBV welcomes the additional $6.7 billion in total estimated investment for new capital projects to support education, health, transport, and local communities across the state. This brings new and existing projects underway to $184 billion to transform transport infrastructure and improve access to services in local communities. MBV also welcomes the State Government’s continued investment in infrastructure, which gives our members opportunities to tender for these works across Victoria. As part of the continuing Big Build program, the State Government has additionally funded numerous projects - some of which are listed below: $205 million to deliver a package of V/ Line organisational improvement projects to support reliability and efficiency of regional passenger rail operations and major periodic maintenance works on freight rail corridors across the state. $192 million for several high-priority upgrades on regional and metropolitan roads to improve network efficiency, travel times and road safety and to develop future upgrade projects. $47 million to build a replacement fitfor-purpose 24-hour South Melbourne Police station and build a new police station in Point Cook.
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$44 million to implement a permanent solution to manage mine-impacted groundwater in the vicinity of the Central Deborah Gold Mine in Bendigo – this will include the construction of a new treatment facility. $50 million funding to extend the Growing Suburbs Fund to deliver critical local infrastructure projects that support economic participation across Melbourne’s interface councils and regional Victoria’s peri-urban shires, which are experiencing population growth and changing demographics. The fund will provide grants for new and upgraded local community infrastructures such as health and wellbeing hubs, community centres, arts and cultural facilities, parks and reserves, early education and learning centres and sports and recreation facilities that have dedicated community space and support multi-use purposes.
new infrastructure. This will contribute to a steady pipeline of work and increased economic activity. MBV hopes that the State Government will continue to work with the industry to address supply and trade shortages as these continue to limit our industry’s capacity to keep up with the demand for work. The upward pressures this has on the cost of construction inputs will negatively impact the State Government’s ability to deliver these projects within budget. The Andrews Government will spend about $19 billion on projects this financial year and more than $21 billion on average over the next four years, a four-fold increase on average annual infrastructure spending between 2005 and 2015. More than $23 billion will be spent in 2023-24.
Below is a graph detailing the State Government’s investment in infrastructure.
However, the capacity of the construction sector to keep pace with the State Government’s ambitions could “tap out” when government spending reaches about $18 billion to $20 billion, Mr Pallas told the media. As such, the State Government could stagger its future announced projects.
The State Government’s infrastructure program will provide certainty and confidence to the engineering, construction and manufacturing sectors involved in building
MBV will continue to advocate to the State Government to invest in the recommendations as outlined by the Commissioner for Better Regulation and red Tape’s Supply Chain Report.
GOVERNMENT INFRASTRUCTURE INVESTMENT
Victorian Budget Papers 2022/23 Strategy and Outlook p. 72
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Victorian State Budget 2022/23 – Overview
3. Rise in interest rates The Reserve Bank of Australia (RBA) yesterday announced that it will increase the official cash rate by 25 basis points to 0.35 per cent. With inflation rising, the RBA has determined that now is the right time to begin withdrawing the monetary support that was put in place to help the Australian economy during the COVID-19 pandemic. Cost of living pressures have increased more quickly than at any time over the last 20 years, with official ABS data released last week showing that consumer prices rose by 5.1 per cent over the year to March 2022. This is the first increase from the RBA since November 2010, over 11 years ago. The rise in interest rates will have impacts on the building and construction industry, as this will lower demand for building work as consumers will now have to pay more if they take out a loan
to purchase residential land, build a new home, renovate, or buy an existing home. Those who have taken out a mortgage over the last decade will be experiencing their first interest rate rise which may have a sobering impact on their spending behaviour as their loan repayments start to rise. This will lead to a slowdown in consumer spending in the economy.
4. Conclusion On behalf of our members, MBV will continue to advocate to the State Government on the effects of supply chain issues and the impact of insolvency in our industry. We look forward to continuing to work with the State Government to build a better future for our state. The MBV media release in response to the State Budget can be found here.
Victorian State Budget 2022/23 – Overview
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Need further information? We hope you have found this 2022/23 Budget overview of use. If you need further information, please contact MBAssist at (03) 9411 4555 or MBAssist@mbav.com.au.
Master Builders Victoria 332 Albert Street East Melbourne VIC 3002 Phone: (03) 9411 4555 Email: info@mbav.com.au
mbav.com.au