Below is an edited extract of a new research report entitled “Labor’s Big Build Hits A Dead End – What’s Next?”, written by Bob Birrell, Ernest Healy and John Masanauskas from the Australian Population Research Institute.
The Big Build has reached a dead-end.
The Allan Labor Government acknowledged that it was time to rein in the Big Build during the release of the Victorian 2024-25 Budget.
But this was an illusion. The Government remains intent on keeping Big Build at the heart of the Victorian economy and continues to assume that Melbourne will grow from 5.2 million to 8 million by 2050…
It will go ahead with two gargantuan projects, the North East Link, currently costed at $26 billion, and stage one of the Suburban Rail Loop, costed at some $34 billion. In addition, there will have to be a multitude of further projects to provide for 8 million residents…
If so, it will be a disaster for Victorians because, while the Federal Government refuses to provide the required funds, most of the state’s capital will be directed to the Big Build, precluding other more important ends.
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The most extravagant project, the Suburban Rail Loop, should be cancelled forthwith…
If the Commonwealth does not increase this commitment, it will be a financial disaster for the State Government.
Premier Jacinta Allan has recently revealed that her government has been assuming that it will provide a third of the funding, the Federal Government another third (some $11 billion) and that the remaining $11 billion will come from taxes on the businesses benefiting from increased economic activity in and around the SRL stations.
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It is hard to see the latter ever coming to pass, given that such taxes are likely to suppress business investment.
The prospect is that the State Government will be left holding a massive financial baby with multiple serious consequences for Victorians…
Instead of going cap in hand to the Federal Government for infrastructure funds, the state should insist that the Federal Government STOPS loading Victoria with so many migrants flowing from its Big Australia population policy…
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Victoria should be demanding that the Federal Government stop using Melbourne as a dumping ground for its Big Australia immigration policies. It should demand that the federal government significantly curtail immigration-led population growth.
At the very least, it should insist that this should only resume if the Federal Government promises to pay for the crushingly expensive city building required to accommodate rapid population growth.
The Victorian Government is doing neither of these things. Instead, it has settled on a comfortable, if supplicant, role as a recipient of Big Australia migrant flows.
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It has accepted this role even as it acknowledges that the earlier associated aspiration of turning Melbourne into a hi-tech production hub is dead…
Victoria will continue to absorb a large share of the extra people delivered by the Federal Government’s Big Australia commitment. The Federal Labor Government is heavily complicit.
The post Covid Federal Government Jobs and Skills Summit unleashed a huge boost to immigration levels through 2022 and 2023.
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Even with current assurances that the numbers will decline, it projects that national net overseas migration (NOM) will continue at least 250,000 a year – more than enough to require a continuation of the Big Build in Victoria.
Victoria is the bunny. It continues to accept this role even as the Federal Labor Government has made it clear that it will not provide the funds needed to accommodate the additional people…
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And, to the extent that this flow continues, Victoria must demand that the Federal Government provides the funds to accommodate them.
The matter is urgent…
At present nearly half of Victoria’s revenue comes from special purpose allocated by the Federal Government and from GST. The rest comes from State taxes, like property taxes or special levies, as with the Covid levy.
To sustain the Big Build in a context where the Federal Government is a minor contributor to the capital required, the State will have to levy additional taxes, making it less attractive as a location for footloose capital and business investment.
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The Victorian Labor Government appears to have decided that the Big Build at least gives Victoria a role and direction, even if it is as a mendicant state…
Victoria needs a new business model, focusing on completing its renewable energy transformation and on starting a new industry policy.
The Australian economy is trending towards a reliance on commodity industries. The Albanese Government’s recent Future Made in Australia policy direction does not spend a penny in Victoria. It is mainly going to commodity extraction and processing in the north and west of the nation.
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Meanwhile, largely unnoticed, Victoria has registered a huge and growing deficit on all international goods trade, equivalent to minus $11,997 per person in 2023, compared with minus $8,524 per person in NSW and a surplus of $75,350 for Western Australian residents…
In 2019, Victoria imported $58 billion of ETMs [Elaborately Transformed Manufactures] and exported $9.8 billion. Just four years later this gulf had massively enlarged. In 2023, Victoria imported $78 billion ETMs and exported $8.8 billion.
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Under current industry policy settings, any prospect that Victoria could become an internationally competitive hub for hi-tech industries is a pipedream.
An example of population driven growth ETM imports is ‘road motor vehicles and parts’, which grew by 103 per cent between 2010 to 2023. By 2023, this import item alone accounted for 17 per cent of all Victorian merchandise imports, incurring a trade deficit for that item of nearly $18.5 billion…
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The longstanding Victorian aspiration to become a globally competitive hub for knowledge-intensive industries has failed.
Moreover, despite Melbourne’s massive size as a service centre, Victoria’s international trade in services is also in deficit…
Victoria had a small net deficit on international trade in services of $1.6 billion [in 2022-23]. It would have been vastly more if not for a net surplus on education export services (overseas students) of $10.7 billion.
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The latter is not much given that international students are a huge component of Victoria’s net overseas migration intake, which in turn is the major factor driving the justification for the Big Build…
A new industry policy must be initiated. Otherwise, Victoria’s outlook is that of a mendicant state propped up by federal handouts.