Treasurer relying on hot property

Janet and husband Colin Ferguson with children Isabella, Millie and Zoe. Picture: Jason Edwards Source: Herald Sun

THE State Government is promising a $2.5 billion Budget surplus within four years, relying on a strong recovery in the Victorian property sector forecast to deliver thousands of new jobs.

This is also predicted to push unemployment back to a low of around 5 per cent within two years.

But economists said the Budget papers were "overly optimistic" in tipping growth would rise from its current 1.5 per cent to 2.25 per cent next year and then 2.75 per cent in following years. A growth rate of around 2 per cent was seen as much more likely.

The Coalition's Budget details a staggering rebound in tax revenue growth from a paltry 0.5 per cent this year to 4.6 per cent in 2013-14.

Overall tax revenues are forecast to rise from $16.4 billion to a whopping $19.2 billion by 2016-17 on the back of a strong recovery in employment and the housing market.

Treasurer Michael O'Brien yesterday conceded the Budget outlook was "optimistic".

Property tax growth this year was put at 9.1 per cent -- above the average level generated pre-GFC -- and over the forward estimates period property taxes are tipped to bring in an additional $1.3 billion.

In his first Budget, after only two months in the job, Mr O'Brien backed his Treasury officials' forecasting ability over Canberra's.

He said property and payroll tax rises were so strong as a result of coming off a low base after two years of only small increases.

The Budget shows that net debt will peak at $25.1 billion in 2014-15, up from the previous estimate of $23.1 billion. But the Government is upbeat that the increase in the debt level to 6.6 per cent of Gross State Product won't affect Victoria's AAA credit rating.

Mr O'Brien admitted the biggest challenges to his forecasts would arise from events in Canberra -- especially any possible reforms of the GST payments to the states and any changes to the national partnerships system.

The Federal Government is tipped to next week unveil a $12 billion Budget deficit.

The ANZ Bank's senior economist, Cherelle Murphy, warned the Victorian Government was being a bit too "optimistic" in terms of a property boom and population growth.

"Nationally, unemployment looks like it is going to rise in the coming months and stay high," she said.

"We don't think the outlook for Victoria is that optimistic, especially as the economy will suffer from the slowdown in mining investment through its role in providing professional services to the sector," she said.

Mother of three Janet Ferguson welcomed the Budget for delivering money for education and an increased investment in infrastructure.

"I'm 100 per cent supportive of these spending plans," she said. "But otherwise, there didn't seem to be much in it for my family."

stephen.mcmahon@news.com.au

BY THE NUMBERS

*Forecast for 2013-14

Tax revenues $50.32bn [up] 4.6%

Government spending $50.1bn [up] 3.3%

Unemployment 5.5%

Net debt $23bn [up] 16%

Gross state product 2.25%

Population growth 1.7%

Property tax revenues $6.07bn [up] 13%

Gambling taxes $1.9bn [up] 4.6%

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