It’s nice to be back at CEDA’s Economic & Political Overview.
This is always the ideal forum to outline the strength of the Victorian economy and how we’re travelling as a State.
If you only listened to property pundits, you’d be forgiven for thinking it was all doom and gloom.
But let me assure you, there’s more to our economy than just the property market.
Victoria’s performance in recent years has led the nation, with above-trend economic growth, low unemployment, strong business investment, and an infrastructure pipeline that continues to drive a thriving construction industry.
Today I want to talk about three things:
How far Victoria has come since we were first elected in November 2014;
The Victorian economy today and what it means for this year’s budget;
And finally, how we are building the foundations for long term economic growth.
It’s easy to forget that when we were first elected in 2014, there was a jobs crisis.
Unemployment peaked at 7 per cent. Many people had stopped looking for work and had fallen out of the labour market.
Today, the unemployment rate sits at 4.5%.
In regional Victoria the story is even better, with the unemployment rate at 4.4%, the lowest regional unemployment rate in the nation.
We’ve also seen the participation rate at record highs in recent years with more and more people entering – and staying in – the Victorian labour market.
All up, since we were first elected, more than 440,000 new jobs have been created in this state – more than 70% of which are full time.
We have created the strongest labour market in the country, with jobs growth well in excess of population growth.
That’s edging towards half a million more Victorians now in work – each with their own story, each with their own unique contribution to this state.
Since the November 2014 election, Victoria has contributed almost 37 per cent of national employment growth – well above our share of the national population.
This jobs boom hasn’t happened by accident – it’s because we’ve created the right environment for businesses to invest, expand and hire.
We’ve ensured businesses have access to the skilled workers they need and that our infrastructure is fit for a Twenty First Century Economy.
That’s why we’ve invested in inter-generational infrastructure projects, including the Metro Tunnel, Level Crossing Removal Program and West Gate Tunnel.
The colossal scale of these projects is obvious to all. They will completely change the way we travel, work and live.
All up, government infrastructure investment is projected to reach $13.4 billion in 2018-19, and average $10.6 billion a year over the budget and forward estimates – more than double the ten-year average before we were elected.
That means jobs – over 75,000 of them; for engineers, apprentices and labourers; for talented, hardworking Victorians helping to build our state.
Today, one in ten workers in the state is employed in the construction sector.
With all this investment and activity, it’s no surprise that we’re the best performing economy in the nation.
That’s not just my opinion – it’s backed up by numbers.
Our economy has grown at an above-trend rate for the past four years, increasing by an annual average rate of 3.5 per cent.
That’s well above the comparable national increase of 2.6 per cent per annum.
Since we were elected, the Victorian economy has grown by more than $50 billion in real terms.
While there has been talk of a per capita recession, the latest state data shows that Victoria again bucks that trend.
On a per capita basis, the economy has grown in each of the past four years – at an average rate that is more than double that under the previous state government.
That directly translates to an improved standard of living for Victorians.
Indeed, in 2018, Victoria’s annual wage growth outpaced all the other States.
We’ve overseen the strongest economy in the nation, while endeavouring to ensure no worker and no community is left behind.
It’s why last term we invested $13.6 billion in regional Victoria –almost double the amount the previous Coalition government managed.
We’ve also focused on those communities disproportionately impacted by the transitioning economy.
We’ve seen the closure of the Hazelwood Power Station, the Ford factories in Geelong and Broadmeadows, and Toyota’s manufacturing plant in Altona.
It was devastating for the workers, for their families and for these communities.
Every government witnesses these major disruptions to industries and communities.
How they respond to this economic upheaval speaks volumes.
It reflects not only where their heart lies, but their willingness to innovate, adapt and look to the future.
Rather than give up on these people, we’ve capitalised on their remarkable range of skills.
And we’ve ensured they’re not left hanging in a rapidly changing economy.
We’re working with communities as their local economies transition – and it’s producing results.
In the Latrobe-Gippsland region for example, far from going backward, we’ve seen 12,900 jobs created since we were elected and the unemployment rate at an astonishingly low 3.5 per cent.
This blend of economic leadership, pragmatism, prudence and empathy has been at the core of the four State budgets the Government has handed down so far.
Each Budget has been distinct.
Each has focused on delivering on the commitments we made to the Victorian people.
And of course, each has reflected the prevailing economic conditions at the time.
This year, there’s been lots of talk about a softening property market and revenue write downs.
But this must be put in context. During the past six years, we’ve seen Victorian property prices soar by more than 50 per cent at their peak.
While dwelling prices in Melbourne are currently down 9.1 per cent compared with a year ago, this is coming off a period of significant growth.
But the fundamentals of the Melbourne property market remain strong. We have strong population growth, strong economic growth, low unemployment and low interest rates.
And of course, the Government’s record investments in infrastructure, schools and hospitals all mean that Victoria continues to be a great place to live, work and raise a family.
So I remain confident that the recent drop in prices will moderate.
However, a weaker property market leads to lower tax revenue. This is not only due to dwelling price declines but also lower transaction volumes.
No property boom can last forever so we have planned accordingly.
In the December Budget Update, we downgraded land transfer duty revenue forecasts by $2.4 billion.
It will come as no surprise that we expect to make further significant write downs in the upcoming budget.
In addition to this revenue drop we are also managing the Abbott / Turnbull / Morrison Government’s continued underinvestment in our state.
These three Liberal Prime Ministers have three things in common – they’re from Sydney, they can’t find Victoria on a map and they don’t keep their promises.
They have all refused to honour agreements struck with Victoria that would have provided a fairer share of funding to deliver essential services.
For our schools, our hospitals and our infrastructure – the Commonwealth continues to short-change Victorians.
Which is why I again call for a mechanism to prevent the Commonwealth from unilaterally changing agreements when it suits them.
They’re continuing to withhold $1.1 billion in disability funding that was meant to start flowing to Victoria’s most vulnerable back in 2015.
The Commonwealth Government has been actively collecting this money through the Medicare Levy but we’re yet to see a red cent of it.
It’s appalling that the Commonwealth has reneged on an agreement to support Victorians living with a disability in order to provide themselves with budgetary ballast.
Well, we’re not going to cop it. Regardless of who’s in power in Canberra, we’re going to make sure that Victorians get their fair share of funding.
These write-downs in land transfer duty and the cuts from Canberra mean that this year’s budget will require tough choices.
Call it what you will – a leaner Budget, a tougher Budget – but in no way will this Budget deviate from our core values.
It will consolidate our investments, deliver on our election commitments and continue to support those who need it most.
Yes, we will provide services more efficiently, use our balance sheet effectively, and focus on delivering the things that matter most to our state.
But we’re not stopping – we’ll keep building and keep delivering the services our state needs
Those that most rely on the state for support can rest assured that we will not let you down – and that this budget will not be delivered at your expense.
We’ve never been a government that shies away from tough decisions.
It’s why we’ve maintained our fiscal discipline during times of prosperity, to ensure there’s sufficient capacity to respond when economic conditions change.
Indeed, the Mid-Year Financial Report released this morning confirms Victoria’s diversified economy and the Government’s strong financial position leaves us well placed to manage unforeseen developments.
Our approach to responsible budget management will continue – and we will maintain our fiscal strategy and protect Victoria’s prized AAA credit rating.
As we made clear at the recent election, that means we will increase net debt to 12 per cent of Gross State Product but only to invest in economy-growing infrastructure, including the North East Link, Melbourne Airport Rail Link and the next tranche of level crossing removals.
These infrastructure investments will boost the productive capacity of our state.
It’s just one example of how we’re building the foundations for long term economic growth.
We are in an era of almost unprecedented social and technological change, driven by increased global competition and disruption.
We always endeavour to be one step ahead of the game, by ensuring our economy is well placed to weather potential economic shocks.
Despite our overall economic success, Victoria is facing challenges, with weak productivity growth in recent years – a challenge that most OECD economies are grappling with.
We must be looking at how government can drive productivity growth in all sectors of the economy.
It’s why we recently invested in the biggest shake-up of vocational education and training in the history of this state – better aligning our workforce with the skills and experience employers are demanding.
It’s why we’ve invested more than $10 billion in building the Education State.
This is about more than just building new schools and hiring more teachers, though we’re certainly doing that.
It’s also about ensuring our education system keeps pace with rapid economic and technological change.
We are continuing to look at whether government regulation – and just as importantly, the regulators that enforce them – are achieving their objectives in a way that minimises the impact on business and supports innovation.
With an annual budget of $70 billion, we must also look at how the government can be more productive in the way it delivers infrastructure, health and education.
Key among the challenges in boosting productivity is attracting overseas investment.
Potential investors typically want to know there’s a pool of dynamic, well-educated and skilled workers.
They want to know the infrastructure is world-class and that the economy is in safe hands.
And perhaps most importantly, they want to know whether or not government is a willing partner.
Victoria offers all that and more.
Since we were elected in 2014, the Government has facilitated private investment projects valued at more than $9.2 billion in new capital investment.
These projects are expected to create more than 25,000 new full-time jobs.
But global competition for investment capital is increasingly intense, with investors seeking cheaper opportunities in emerging economies.
Around the world, there are more than 2,500 investment promotion agencies.
Daunting as this sounds, the opportunities for Victoria are immense.
As always, it’s essential we have a coordinated and organised approach.
It’s also essential we have a single-entry point for potential investors.
And it’s vital we use all the levers at our disposal to ensure Victoria is an attractive investment proposition.
That’s why, following the election, we’re establishing Invest Victoria as a new dedicated investment attraction agency.
Invest Victoria will support me in my new role as Minister for Economic Development and will focus on attracting new skills, capabilities and technologies to Victoria.
It will foster a strategic and deeper engagement with industry.
And it will feature a broader range of financial programs to support investment – moving beyond just grant funding to ensure that taxpayers are getting value for money.
In recent years, a diverse range of international companies have based their regional activities in Victoria, including Alibaba, David Jones and Zendesk.
In the past week alone, I announced two newcomers.
First – Kaufland, the world’s fourth largest retailer who will make Victoria its centre of operations for the Asia Pacific region, as well as establishing an initial six new stores across the State.
This is expected to create 1,600 new jobs and inject hundreds of millions of dollars into our economy.
And just this morning, I visited the Florey Institute of Neuroscience and Mental Health in Carlton to announce that Praxis Precision Medicines will be setting up base here in Victoria.
Not only will this create more than 100 new jobs, it will harness the best and brightest minds in Victoria to potentially improve the lives of millions of people across the globe.
It’s a prime example of playing to our strengths and bolstering areas where we already have a distinct competitive advantage.
These announcements are just a snapshot of the immense opportunities that come with an agency such as Invest Victoria.
In my role as Minister for Economic Development I look forward to working with many of you here today to grow your businesses, to encourage investment and to create Victorian jobs.
We want to build on the phenomenal economic and employment growth seen over the first four years of the Andrews Government.
That growth combined with our responsible budget management means we are well placed to not only weather the current property market downturn but to lay the foundation for future economic growth.
That means we will deliver our election commitments – including the biggest infrastructure program Victoria has ever seen.
We will work with business to boost productivity and attract new investment to Victoria.
We will keep on delivering the things that matter most to our state.
Because this is a Government that delivers for all Victorians.