The unkindest cut
Illustration: Mick Connolly.
LAST December, just before announcing thousands of jobs would be slashed from the Victorian public sector, Ted Baillieu and Kim Wells crunched some numbers.
As they compared the budget forecasts of every state, the Premier and his Treasurer noticed only two jurisdictions had predicted ongoing surpluses over the next four years: Victoria and Western Australia.
The mapping exercise cemented much of the thinking behind Tuesday's budget: Victoria might not be a resource state, but it has long been a leading economy. Building surpluses to fund future infrastructure and services was therefore paramount. Going into deficit, as Wells would later say, ''was not an option''.
But while this year's budget is fiscally responsible, it's also politically risky - especially for a government losing ground in the polls, partly because of its reputation for inaction.
The government has delivered a $155 million surplus next year (rising to $2.5 billion in 2015-16) to cushion the state from economic shocks and to build a war chest for the November 2014 state election. But to help pay for it, fees and fines will rise, programs for many disadvantaged families will be slashed, and the Coalition will embark on the biggest program of public sector cuts since the Kennett era.
About 4200 jobs will be shed from the bureaucracy - 600 more than the cuts announced in December, when the government suggested there would be no further pain.
The School Start Bonus will be scrapped, meaning low-income families will no longer get a $300 grant when their children start school. The home buyer bonus will also cease, meaning people will have to save up to $19,500 more for deposits on their first house.
Fines for misdemeanours such as littering or travelling without a train ticket will rise by 12.5 per cent, and some TAFEs could close because of funding cuts to 80 per cent of vocational courses.
Yet Liberal hardheads describe this budget as a ''defining moment'' for the 18-month-old Baillieu government, a stamp of its economic credentials in tough times and revenue write-downs.
Sure there might be short-term pain, insiders say, but most of the noise is expected to come from unions who traditionally side with Labor anyway. And if all goes according to plan, there'll be more to spend later. As one senior strategist told The Sunday Age: ''We could have decided to go into deficit and not cut the programs. Or we could have taken the tougher option, which is what we did. It was a budget which showed our spine.''
Mind you, Victoria isn't the first state to make tough decisions in a bid to balance its books. Remember Anna Bligh? A few years ago, as Queensland premier, Bligh announced her Labor government would sell a range of state-owned assets to offset the losses in her coming budget. It was seen as a broken promise, not dissimilar to Baillieu's pledge there would be ''absolutely'' no cuts to the public sector. Even the rhetoric sounds familiar.
''We do have to take this action in order to put our budget on a much more solid footing and guarantee Queensland's future,'' Bligh said at the time. The electorate never forgave her.
For Baillieu, it's still early days, and so far the budget has been well received by the business community; less so by others who question its priorities. Critics point out that $670 million will be spent expanding the prison system, far outweighing funding for many programs that tackle the causes of crime.
About $100 million a year will be cut from TAFE, and public education will take a hit. At the same time, more money is being pumped into private schools.
And what about transport? For all the bleating about overcrowding and Labor's myki mess, there was precious little investment in Melbourne's trains, trams or buses, while the cost of myki blew out by a further $150 million. Go figure.
Boiled down, this budget is also premised on two leaps of faith: that the economy will improve between now and the next election, and that the decision to keep a surplus at almost all costs will not be outweighed by the political pain. Success will also depend, in part, on how well the government sells its message: that cutting the public sector will lead to productivity gains, offset the recent losses in state revenue, and protect the budget from future shocks. The problem is, clever marketing and clear communication isn't exactly this government's forte.
We know that from July 1, 4200 public sector jobs will be lost over the next two years. We also know the government aims to meet this target through voluntary redundancies in ''back-office'' roles, non-renewal of contracts, or where there is duplication between departments. People will be sacked only if the target falls short.
Yet Baillieu and Wells still won't tell us what kind of back-office jobs they're talking about, the type of duplication they seek to end, or even release the long-awaited Vertigan report, on which all these decisions are based. It's hard to convince Victorians you're on the right track when you're not even prepared to say exactly where you're taking them.
Having crunched the numbers back in December, the Premier insists the path of austerity is the right one. The alternative, he argues, would be to plunge even further into debt and jeopardise Victoria's AAA credit rating, making economic recovery even more difficult.
''Like any household, we need to demonstrate that we can pay our bills, service our debts, and provide for the future,'' Baillieu says. ''There is no magic pudding. We can't have it all, and some things do have to change.''
The question is whether Victorians agree.
■Farrah Tomazin is state politics editor. Twitter @farrahtomazin