Baillieu warning: no budget magic
Ted Baillieu vows a 'responsible approach'. Photo: Joe Armao
THE state government's tax revenue predictions have been slashed by more than $2 billion a year compared with when it was elected, prompting Premier Ted Baillieu to warn ''there is no magic pudding''.
Foreshadowing further deep spending cuts in tomorrow's state budget, Mr Baillieu used an address to Liberal Party faithful yesterday to emphasise the economic challenges faced by his government.
''We are going to take a responsible approach to budgeting in this state,'' he said.
It is understood the budget will show Treasury's revenue predictions have been downgraded for GST collection by a total of $6.1 billion over the next four years, compared with the estimates presented to the government soon after it was elected in November 2010.
Predictions for payroll tax collections over the coming four years have been downgraded by $762 million because of the sluggish jobs market, while stamp duty predictions have been downgraded by $1.5 billion.
In total, the slowing national economy, lower than expected property sales and anaemic employment growth have cost $8.3 billion in lost revenue over four years compared with what the government was originally told it was likely to get between 2012-13 and 2015-16 - equivalent to or more than $2 billion a year.
But there will also be some sweeteners. The government will unveil more than $364 million worth of hospital projects over the next four years and about $900 million on a range of transport projects, including three level-crossing upgrades.
Mr Baillieu will also unveil a new international engagement strategy, focusing on promoting areas of comparative advantage such as agriculture, IT and food exports to Asia and the Middle East.
''We are going to have a much greater focus on investment attraction,'' he said.
The government's political strategy revolves around the idea of building up future surpluses to pay for infrastructure without taking on debt. Mr Baillieu said surpluses were not an end in themselves but the revenue downgrades have raised the prospect his may be the first Victorian government since the mid-1990s to unveil a deficit.
There is growing speculation the budget will involve further public sector job cuts, in additional to the cuts of 3600 announced in December.
The government is also likely to announce ''public sector efficiencies'' involving outsourcing and private sector contracting.
''There is no magic pudding,'' Mr Baillieu said. ''We can't have it all and some things do have to change and nor is it an overnight wonder.''
Opposition Leader Daniel Andrews ridiculed the Premier's description of Victoria as a leading state.
''I don't know about magic pudding but there is no magic in this state at the moment,'' Mr Andrews said. ''According to Ted Baillieu, everything's tickety-boo in this state, we are, quote, leading the way - leading the way, yeah, with Tasmania, the only place in Australia with a higher unemployment rate.''
Mr Baillieu urged ''interest rates relief'' when the Reserve Bank board meets on Tuesday.