Vic govt to rein in spending for surpluses

Victoria is expecting a budget surplus of $224.5m in 2013/14, growing to about $2.55bn in 2016/17. Source: AAP

VICTORIA'S forecast of growing budget surpluses over the next four financial years will be based upon a tight rein on spending.

The Napthine government says the budget surpluses will enable it to fund major infrastructure projects such as the East West road link in Melbourne without blowing out the state's debt.

The Napthine government expects a budget surplus of $224.5 million in 2013/14, growing to about $2.55 billion in 2016/17.

In its budget papers released on Tuesday, the government said expenditure growth over the next four financial years would average 2.7 per cent each year compared to forecast revenue growth averaging 4.1 per cent each year.

The government expects to keep growth in employee expenses, which will account for 41 per cent of annual government expenses in 2013/14, at 2.4 per cent in 2013/14 and at an average of 3.0 per cent over the following three years.

Among the initiatives to save money, the state government will redirect the first home owner grant to new homes only and cap gas and electricity concessions.

The government will spend $6.1 billion on infrastructure in 2013/14 and average $4.7 billion on infrastructure spending over the next three years.

Infrastructure investment is expected to be fully funded from the surpluses by 2015/16.

Delivering his first budget, Victorian Treasurer Michael O'Brien says the budget is building for growth amid difficult economic conditions around the nation.

He says state governments and the federal government are bleeding red ink, piling up massive deficits and letting spending get out of control.

"That is not the story of the Victorian budget," Mr O'Brien said.

"4.1 per cent average revenue growth, 2.7 per cent average expenditure growth - that's how you manage your budget."

Mr O'Brien said the budget was based upon a growing economy, falling unemployment, growing surpluses and major new infrastructure for Victoria.

Growth in state revenues was not expected to return to levels seen before the global financial crisis, so growth estimates over the next four years were conservative.

State taxation revenue was expected to grow by 5.3 per cent in 2013/14, driven by growth in payroll tax generated by higher employment, and more land transfer duty generated by an improvement in the Victorian property market.

Mr O'Brien said state revenues had been affected by lower GST (goods and services tax) from the federal government, and GST revenue was projected to grow by 2.5 per cent in 2013/14.

But it was projected to increase by an average of 6.5 per cent per year over the following three years.

Victoria's net debt is forecast to be at 6.4 per cent of gross state product in 2013/14, falling to 5.4 per cent by 2016/17.

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