Treasurer Tim Pallas has defended a multibillion-dollar property tax grab and promised a path back to surplus as he prepares to unveil more support in Thursday’s budget for people worst hit by last year’s lockdowns.
On the eve of delivering his second Victorian budget in six months, Mr Pallas predicted smaller deficits over the next four years and said the budget papers will show a way out of deficit following the government’s big-spending response to the effects of the pandemic.
Treasurer Tim Pallas said Victoria was the “standout economy of the nation” before the pandemic hit.Credit:Justin McManus
The budget will also include an extra $1.37 billion for the Andrews government’s signature rail project – the Metro Tunnel – after it agreed to split a $2.74 billion blowout with the consortium building the tunnel.
The government will push ahead with a plan to raise an extra $2.4 billion in property taxes in an effort to claw its way out of a budget black hole.
The proposed tax hike will include an increase in stamp duty from 5.5 per cent to 6.5 per cent on properties that sell for more than $2 million.
Mr Pallas said the policy was not meant to vilify Victorians who had been successful. He said he was simply asking homebuyers to “make a contribution to the wellbeing of the state”.
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“What we are saying is that the opportunity for those who have done well to help those who haven’t, has to be a universal and uniting principal of this recovery,” he said.
“One of the mechanisms that we therefore need to put in place is a recognition that where there is a capacity to make a contribution to the overall community, those that have that ability should be able to do it.”
Land taxes on properties worth more than $1.8m will also rise and a new windfall gains tax will also be introduced where a property’s value is boosted by a council rezoning.
Several federal Labor MPs, speaking on the condition of anonymity, warned of the risks of taxing would-be homebuyers over concerns the policy could be used as a weapon in a political scare campaign.
In March, federal Labor quietly dumped changes to negative gearing and capital gains that it took to the 2016 and 2019 federal elections fearing it would be framed as an attack on aspirational Australians.
Prime Minister Scott Morrison took a swipe at the property tax plan on Wednesday saying it would “slow growth”.
Mr Pallas hit back saying the nation’s economic recovery was being fuelled by growth in Victoria.
“The federal Treasurer boasts that the Australian economy is roaring back to life, well if it is, it’s because Victoria put the tiger in the tank,” Mr Pallas said.
The budget will include $1.37 billion to pay for cost blowouts on the Metro Tunnel project.Credit:Joe Armao
The state government is not expected to announce any new major infrastructure projects in the year’s budget with Victoria already facing cost blowouts for its $81 billion pipeline of works.
Mr Pallas said he could not guarantee the government would not be hit with more cost blowouts but said he had demanded “greater rigour” around projects to ensure taxpayers got value for money.
“The state has to recognise there will be challenges in these projects going forward,” he said.
“Projects change in terms of time and people’s expectations of what they are supposed to deliver and that has a cost implication.”
“Can I guarantee there will never be additional costs to projects? No … but making sure that the taxpayer gets value for that outlay is vitally important.“
He said he and the government needed to “better apportion risk”.
“Some of the projects that we are putting in place now have very, very substantial risks and some companies are just afraid to bid.”
The budget is expected to include record spending on mental health services, potentially funded with a new levy.
On Wednesday, acting Premier James Merlino said the government was committed to implementing all the recommendations of the royal commission, which included a mental health levy to fund service improvements.
"We made it absolutely clear … we accept and we will implement every single recommendation," Mr Merlino said.
The state opposition demanded Labor pay for mental health with its own revenue, not with a new levy.
“Mental health should be funded from general revenue, not from a special tax,” Opposition Leader Michael O’Brien said on Wednesday.
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