Victorian Budget 2020-21: The Recovery

Luke Sayers AM, Founder and Executive Chairman, Sayers 

The 2020-21 Victorian Budget is set against the backdrop of a once in a lifetime set of circumstances. As a state, we have battled an invisible enemy and we have emerged from a lockdown none of us could have ever imagined. The economic plan required to take our great state forward needs to be as courageous and committed as Victorians have been in defeating the virus.

To start the process of rebooting the Victorian economy, Victorian Premier Daniel Andrews promised the biggest and most significant budget in Victoria’s history. He and Victorian Treasurer, Tim Pallas have delivered on that promise. 

The Victorian Government has clearly signaled its intention to use all the levers it can to get the economy moving forward. The budget deficit is forecast to be $23 billion in the 2020-21 financial year, with net debt this year at $87 billion and set to grow to about $155 billion by the 2023-24 financial year. The scale of the government support and boldness is extraordinary. 

The challenge we face is like no other in recent times. The Victorian economy is expected to fall by 4 per cent in 2020-21 and unemployment to reach 8.25 per cent this quarter. We need, now more than ever, a budget to tackle this challenge head on. We can leave nothing to chance.

A budget is not only an economic document, it’s a government's commitment to the people, of what it intends to do. The government has announced significant spending in mental health, family violence, health, and child protection. We are at a critical point in our emergence from the lockdown and the most vulnerable need a hand up to rebound out of the tough time they have endured.

Restoring business confidence and encouraging private sector investment will be critical in recovering the lost economic ground. This budget provides the opportunity to do more for those who need it the most, particularly women and the youth who have been hardest hit by the pandemic. 

The Big Housing Build commitment of $6 billion sees the government committed to social and affordable housing to create 12,000 houses over the next 4 years, is a worthy initiative given the significant increase in public housing waiting lists over the last two years and the estimated 10,000 construction jobs each year that will be created during the building phase. 

The Big Build mandate of the Andrews Government has announced major capital works including on schools and infrastructure spending. This program delivers jobs that we need now and the infrastructure we need for our future. We will witness a program of infrastructure of herculean proportions. This includes further level crossing works, the significant North East Link, the Melbourne Airport Rail Link and early works and construction of the Suburban Rail Link. Infrastructure is foundational to deliver ongoing efficiencies and productivity improvements that will uplift the State’s growth capacity. 

Businesses are being supported through a range of measures. The budget has committed $1.1 billion in grants to support small and medium sized businesses and a further $836 million in new tax credits to help businesses hire back workers, restore hours, and create new jobs. Business cash flows will be assisted by the $1.7 billion cash flow boost through the deferral of 2020-21 payroll tax liabilities for payrolls up to $10 million. These measures make our state stronger and a more competitive place to do business. Incentives like these support our economic recovery.

This budget really signals that Victoria is again open for business and open to even more opportunities. With interest rates so low, it makes great sense to borrow for long term productive investments. The RBA’s desire for states to do all they can to stimulate economic growth is writ large in this budget. Now is the time for treasuries around the nation to lean into this challenge, this budget clearly focuses on growing our way to prosperity. It leaves nothing to chance, and to coin a football analogy, they have left it all on the field. Now, like we did with getting the virus under control, it is up to all Victorian’s, the community and business, to drive forward with optimism and commitment to build a brighter future for all.  

Wednesday, 25 November 2020 

Luke Sayers AM is the Founder and Executive Chairman of Sayers, a modern advisory and investment business.