Wednesday’s Victorian State Budget for 2016-17 showed just how lucrative the property boom has been for this state. Last year the government estimated stamp duty on sales of land and property would grow by 2.9% in 2015-16, but the actual growth was eight times that at 23%.
Overall, tax revenue grew by 9.5%, a positive outcome that the Turnbull Government would be eyeing enviously. Federal Treasurer Scott Morrison can only wish for the $2.9 billion surplus the Victorian government expects next year, with a total of $9.3 billion worth of earnings expected over the next four years.
How long will this seemingly never-ending boom last for? Surely property prices will stop skyrocketing, and sales will slow down. Even last year’s budget forecasted a “projected easing…as the property cycle matures”. In other words, they thought the boom would be over by now. The 2016-17 Budget carries a similar tone, expecting a fall of 6.4% in stamp duty revenue next year.
Eventually, this property craze will slow down but not any time soon. Interest rates are at record lows and next Tuesday the Reserve Bank might even cut rates to below 2%.
So what else does this Budget say? It’s mixed news on the employment front. After several years of growth in only part time work, full time jobs have increased, but wages have not. More welcome is the $594 million for more police officers; $572 million to implement recommendations by the Royal Commission into domestic violence; and funding for 11 new schools, such as a much-needed Richmond High School.
The Victorian Government is also committing to funding both the $10.9 billion Melbourne Metro Rail Tunnel Project and is putting in $1.46 million into the Western Distributor Road Project, after the Turnbull Government decided not to help out.
Victorian Premier Daniel Andrews said, “Malcolm Turnbull made it very clear that he is not interested in being a partner in this project”.
That said, Turnbull and his government don’t have the same rivers of gold flowing from the property boom to rely on for big spending items. Victoria is in a rare position to take advantage of an abundance of cheap money.
The test for the Victorian Government will be whether all these infrastructure and social welfare projects are completed on time and on budget, because a property price crash or an economic downturn, could throw the current surpluses out the window.