Vic Budget 2021-22: A Budget to leave no Victorian behind

Thursday 20 May 2021

Vic Budget 2021-22: A Budget to leave no Victorian behind

This afternoon, Treasurer Tim Pallas handed down the 2021-22 Victorian State Budget, declaring that “no Victorian will be left behind” in the state’s recovery from COVID-19. Mr Pallas cited encouraging economic indicators, including a high workforce participation rate, increased levels of business confidence and high numbers of building approvals, to declare that Victoria’s economic recovery is underway in an “optimistic rush that shows a heartfelt confidence in the future”. Delivering his seventh budget, Mr Pallas confirmed Victoria would be moving to Step Two of the Andrews Government’s fiscal plan of returning to an operating cash surplus with a tapering of expenditure in the near-term.

Mr Pallas revealed a deficit of $17.4 billion in the 2020-21 financial year, down from a forecast $23.3 billion in last year’s November Budget. Forecasting a deficit in the 2021-22 financial year of $11.6 billion, Mr Pallas announced Victoria is expected to return to an operating cash surplus of $1.1 billion by 2022-23, increasing to $3 billion in 2024-25.

The 2021-22 State Budget places significant emphasis on providing essential services to Victorians in need, particularly in the areas of aged care, mental health, education and family violence. To fund the increased provision of services, Mr Pallas confirmed the Andrews Government will look to increase taxes on top-end property owners who have stood to benefit from increased real estate prices during the pandemic.

Following the release of the findings of the Royal Commission into Victoria’s Mental Health System, Mr Pallas announced a $3.8 billion investment into mental health, including additional enhanced community-based care, the construction of the first 20 of up to 60 new local mental health services, and funding for suicide prevention. Mr Pallas said Victoria’s investment in mental health will be funded by a new Mental Health and Wellbeing Levy. This levy will be a 0.5 per cent surcharge on payroll tax for businesses with over $10 million in national wages, and a further 0.5 per cent increase for businesses with payroll over $100 million nationally.

Mr Pallas noted the lasting impact of COVID-19 on Victoria’s broader health system and revealed a further $7.1 billion to support Victoria’s hospitals and healthcare, including a $1.3 billion investment in COVID-19 related initiatives, such as contact tracing and the vaccine rollout, and an initial $50 million towards a mRNA vaccine manufacturing capability. The investment also includes strengthening of the hospital system through funding more emergency department staff; additional student placement days; more paramedics and support staff for Ambulance Victoria; emergency department paediatric zones; and further investments in the expansion and construction of new hospitals.

In education, the Treasurer said the Government’s focus is firmly on student mental health and wellbeing, particularly after the Royal Commission’s recognition of the critical role of schools in childhood mental health. Therefore, the Government has committed to expanding the Mental Health in Primary Schools pilot and support of the Doctors in Secondary Schools Program. The Budget also places focus on the rollout of school infrastructure, committing to building 13 brand-new schools and establishing the Victorian Academy of Teaching and Leadership as a centre of teaching excellence. The Treasurer also announced an investment of $167 million to continue the long-term roll-out of three-year-old pre-school to save money for families and support an estimated 6,000 jobs.

Noting the Andrews Government’s ongoing implementation of the recommendations of the Royal Commission into Family Violence, Mr Pallas committed a further $354 million to support violence survivors and prevent family violence; and a $1.4 billion investment for improved information sharing and an expansion of the child protection practitioner workforce to help keep vulnerable families together.

Continuing the Andrews Government’s focus on infrastructure, Mr Pallas revealed a commitment to construct 25 new modern trains to be assembled in Victoria, upgrades to train stations and an investment of $613 million to support the V/Line train service.

Mr Pallas also revealed a package of targeted tax relief to “kick-start” the CBD residential property market and support construction jobs. This includes cutting the regional payroll tax rate to help small businesses create new jobs and lifting the payroll tax-free threshold to $700,000 earlier than planned. The state will also lift the land-tax free-threshold to $300,000.

Whole of Government – Revenue Measures

$386.7 million will be raised in 2021-22 and $2.9 billion through the Mental Health and Wellbeing Levy which will see the state government gain additional revenue through payroll taxes levied on companies with payrolls over $10 million. The surcharge will be levied at a rate of 0.5 per cent for businesses with national payrolls above $10 million and 1.0 per cent for those with national payrolls above $100 million.
$335.9 million in 2021-22 and $1.53 billion, over the forward estimates, will be raised through increase in land tax rates for high-value landholdings. The tax will be levied by an additional 0.25 per cent on taxable landholdings exceeding $1.8 million and 0.3 per cent on taxable landholdings exceeding $3 million.
$136.7 million in 2021-22 and $761 million, over the forward estimates, will be raised through a premium duty rate on land transfer of high-value properties for property transactions with a value over $2 million.
$47.6 million will raised in 2021-22 through an increase to the wagering and betting tax from 8 per cent to 10 per cent of net wagering revenue, with the funds to be redirected into the state’s Racing Industry.

For further information on key Vic portfolio measures, please refer to GRACosway’s detailed briefings:

KEY PARAMETERS

Net debt to reach $102.1 billion
Deficit of $11.6 billion
Total expenditure $86.2 billion
Gross State Product (GSP) to increase by 6.5 per cent
Employment to grow by 2.5 per cent
An estimated 243,000 additional jobs to have been created between September 2020 and March 2021

FURTHER READING