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The Financial State of Victoria

By on October 24, 2012

BRUCE McCLURE General Manager CMPA comments on a recent address by the Hon Kim Wells MP Treasurer of Victoria on the financial state of Victoria.

A T the recent Civil Construction Alliance meeting held late in November 2012 the Hon Kim Wells MP addressed the meeting and commented on the state of Victorian finances and the economical and fiscal challenges ahead.

The details shown below are from the presentation that he made at the meeting:

Challenges Coalition faced coming to government

Number of significant budgetary challenges since coming to office:

Major project cost pressures – over $2 billion black hole including:

  • Myki
  • Regional Rail (No budget for signalling or rolling stock)
  • Melbourne Wholesale Market Redevelopment
  • Health SMART
  • LEAP/LINK Police Database
  • Olivia Newton-John Cancer and Wellbeing Centre

Legacy of the disastrous Desalination Plant which will cost Melbourne water consumers $1.8 million per day for twenty seven years.

Victoria’s economic priorities

Challenging economic circumstances reinforce the need for strong public finances, low debt and a AAA credit rating. A stronger fiscal position underpins business and community confidence and builds greater resilience. Stronger finances are a key element in a broader economic strategy based on:

  • Creating stronger budget capacity
  • Improving productivity to boost prosperity
  • Growing the economy
  • Supporting industries to transition

Economic & fiscal challenges

  • Current economic environment
  • Global uncertainty
  • High Australian dollar
  • Slower Australian economy
  • Subdued household & business sector confidence
  • Budget surplus
  • Reduced state revenues – $7.6 billion over forward estimates
  • $100m budget surplus objective; projection of $2.5b by 2015-16
  • Current debt levels
  • Commonwealth funding
  • Seeking support on major projects such as East-West Link and
  • Melbourne Metro

Infrastructure Australia Submission

Set out priority projects across four themes:

  • Major city shaping projects
  • Getting the most out of existing infrastructure
  • Planning for longer term infrastructure
  • Projects to enhance the National Land Transport Network

These projects are designed to address gaps and increase efficiency of the freight and public transport network in metropolitan Melbourne.

Expand the resilience and capacity for cross city and orbital travel to benefit both business and the community.

Suite of projects to improve transport links for regional Victorians.

Implementation Guidelines

  • Apply to all on-site public building and construction work in Victoria
  • Are binding on contractors in relation to their future privately funded work
  • Prohibit parties entering into sham contracting arrangements
  • Prohibit coercion or pressure to make over-award payments
  • Require contractors to take all reasonable steps to bring any
  • unlawful industrial action to an end

Construction Code Compliance Unit

The CCCU has identified seventy six projects where the cost is greater than $10m:

  • the total cost of these projects is approximately $7.5 billion;
  • twenty three of these projects are now subject to the new Guidelines; and
  • these twenty three projects have resulted in seventy three head contractors and their related entities being required to comply with the Guidelines

Conclusion

  • Challenging economic circumstances reinforce the need for strong public finances, low debt and a AAA credit rating
  • Policy frameworks are in place
  • PPPs remain central to the government’s infrastructure strategy, but must reflect lessons learned and changed economic situation

Following questions the Treasurer sought from the Alliance a submission that identifies how red tape (not funding deficiencies) is impeding the efficient delivery of the planning, design, construction, maintenance and management of civil infrastructure.

The Alliance has agreed to prepare a submission for the Treasurer from the prospective of alliance members. Th e CMPA will keep members informed of any response back from the Treasurer on this submission.

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