2016-17 Victorian Budget


Victorian Treasurer Tim Pallas handed down the second budget of the Andrew’s Labor Government today, confirming its commitment to proceed with the Melbourne Metro Rail Project – Melbourne’s second rail loop tunnel – by guaranteeing $10.9 billion over the life of the project, and committing $2.86 billion of this amount in the Budget forward estimates, without the need for future Commonwealth contributions.

The 2016-17 Budget includes $12.4 billion in new capital investment accounted for by realising the 50-year lease of the Port of Melbourne in the forward estimates, alongside a strong focus on social policy. In particular, the Budget allows for immediate implementation of an initial 65 recommendations from the Royal Commission into Family Violence as a “first step” by way of a previously announced allocation of $572 million to 2018-19.

Under the theme of “getting it done,” Treasurer Pallas said today’s budget “strikes a balance between saving for the future and investing in the things we know we need”. In doing so, the Treasurer has linked the Government’s job creation agenda with targeted initiatives to enhance localised employment opportunities and build or improve state assets receiving capital investment. The Treasurer has recognised that higher demand is being driven by strong population growth, which remains steady at 1.8 per cent per annum in this Budget.

Consequently, the Budget upwardly revises a $2.9 billion surplus for 2016-17 from $1.5 billion in the Mid-Year Budget Update (slightly higher than the $1.4 billion estimate from the May 2016 budget forecast).

Whilst confirming Victoria’s AAA credit rating, the Budget estimates a decrease in gross state product (GSP) from 3.0 per cent in 2016-17 to 2.75 percent in 2017-18, with average expenditure growth forecast at 3.3 per cent, slightly under average revenue growth of 3.4 per cent. This accords with decrease in net debt to gross state product, dropping as an average below 5 per cent over the next four years.

There have been many other improvements in key economic indicators since the Mid-Year Budget Update of November 2015. Taxation revenue in 2016-17 has been strengthened by uplifts from stamp duty on property sales ($6 billion up from a forecast $5.32 billion), and the benefits of a growing workforce of more than 3 million Victorians in employment contributing to a payroll tax windfall (up 5.3 per cent in 2016-17). Stamp duty revenue has also been bolstered by the Government’s decision to increase the stamp duty surcharge on foreign buyers of residential real estate from 3 per cent to 7 per cent from 1 July 2016, and a further $250 million over four years is being raised through lifting the royalty rate for companies mining brown coal in Victoria three-fold, to 22.8 cents per gigajoule of energy.

In focussing on capital investment as part of this Budget, the Government has committed:

  • $1.46 billion to the Western Distributor tolled tunnel off the West Gate Freeway
  • $875 million for an extra 28 high capacity trains to prepare for the Metro Tunnel
  • $105 million to purchase an extra five X’Trapolis trains
  • $140 million for the Hurstbridge line upgrade
  • $518 million for the Ballarat line upgrade project
  • $169 million to redevelop the Goulburn Valley Health Shepparton campus
  • $61.3 million for major infrastructure works at the Footscray and Sunshine hospital sites
  • $924 million to build new schools and upgrade existing schools, including $92 million to establish Tech Schools in regional and semi-regional hubs.


  • A budget operating surplus of $2.9 billion in 2016-17 ($9.2 billion over 4 years)
  • Net debt is forecast to fall from 5.9 per cent of GSP in 2016-17 to 4.8 per cent by June 2020
  • Economic growth of 3 per cent in 2016-17, falling to a forecast 2.75 per cent in the out years
  • Budget estimates expenditure growth of 3.3 per cent on average per year – forecast revenue growth remains at 3.4 per cent
  • Unemployment currently stands at 5.7 per cent and is projected to fall to 5.5 per cent by 2018-19
  • Victoria’s population is growing at a rate of 1.8 per cent.

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