May 2020 – Victorian Economic Outlook
May 13th 2020 | , Urban Property Australia
Having already been impacted by the summer bushfires, according to the Victorian State Treasury, the State’s economy is projected to contract by 6.75% in 2020 as a result of the economic shock from the COVID-19 pandemic. Victoria’s economy is forecast to contract in both 2019/20 and 2020/21.
The Victorian economy is projected to be impacted more than any other Australian state given the high exposure to tourism and international students. International education has been Victoria’s largest services export industry for more than a decade, and in 2018 it generated $11.8 billion in export revenue.
Under the Treasury’s modelling, Victoria’s unemployment rate could rise to 11%, and job losses could peak at around 270,000 in the September 2020 quarter. These estimates include the mitigating impacts of Victorian and Commonwealth Government support packages.
Over the month of April 2020, 127,000 jobs were lost in Victoria, resulting in the unemployment increasing to 6.0% (from 5.2% in March 2020). The Unemployment rate in Victoria has now increased to its highest level since September 2017.
Victorian Unemployment Rate
Strong economic growth has been built on the back of overseas and interstate migration, which is why Victoria faces significant structural challenges in the COVID-19 recovery. International education is the state’s largest services export industry, worth more than $12 billion.
The State Government has already set up a $24.5 billion emergency fund, a credit facility it will draw down on to keep Victoria running and stimulate the recovery. The borrowing plan comes on top of the $1.7 billion already committed in the government’s “economic survival package” to support workers and businesses struck by the virus.
With Victoria’s population growing faster than all other Australian states, Government infrastructure investment is projected to average $10.6 billion a year over the next four years, more than double the average of $4.9 billion a year in the four years to 2014/15. In total, there is $30 billion worth of transport projects currently under construction in Victoria and a further $54 billion across various planning stages.
Major projects include the $15.8 billion North East Link, $6.6 billion to remove an additional 25 level crossings, $3.4 billion to transform the suburban transport train network, and $5 billion to match the Federal funding the Tullamarine airport rail link.
The Victorian Government has identified Victoria’s building and construction sector as a key mechanism to revitalise Victoria’s economy during the coronavirus (COVID-19) pandemic. Accordingly, the state government has established the Building Victoria’s recovery taskforce which has been charged with ensuring Victoria’s priority projects continue, are expedited where necessary and can overcome these unprecedented circumstances.
The project fast-track taskforce will assess applications and refer priority projects that meet the criteria that the taskforce can recommend for fast-tracking to the Minister for Planning. Projects will be triaged and assessed for how well they align with Victorian Government policy, are properly funded and shovel-ready, provide wider benefits to the community and factor in the views of relevant stakeholders.
The government will also freeze all fees and fines that were due to be increased in July at current levels – including car registration, traffic infringements, court-imposed penalties and permit fees. The Fire Services Property Levy paid by all Victorian households will also be frozen at this year’s collection level.
In addition, to stimulate the state economy, the Victorian Government is reportedly considering scrapping stamp duty in favour of annual land tax payments. The slowdown of the housing market had also put significant pressure on the budget, and the state was preparing for lower than expected surpluses before COVID-19 struck.
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