2024-25 State budget analysis.
The Victorian government’s budget for the 2024-25 fiscal year unveils a challenging economic landscape, with a projected deficit increase to $2.2 billion and state net debt anticipated to soar to nearly $188 billion by mid-2028.
In response, the budget outlines a strategic plan to curb spending by postponing some key infrastructure projects and discontinuing various government programs.
Despite some spending cuts, state tax revenue is expected to climb steadily, with projections showing a more than $8 billion increase over the next five years; that’s a 22% rise in Government tax revenue.
The primary contributors to this increase are payroll tax and property-related taxes, including stamp duty and land tax, which are expected to rise by 21% and 25% respectively. Together, these taxes will constitute over 40% of the state’s total revenue.
You can see the graph below, the Government is very much relying on increased taxes to mitigate the deficit disaster.
Victorian Tax Revenue to 2028
(graph sourced from abc.net.au)
On a (mildly) positive note, the budget introduces several benefits for small businesses, including raising the payroll tax-free threshold incrementally from $700,000 to $900,000 starting July 1, and reaching $1 million by 2025.
Furthermore, business insurance duty will be phased out over a decade, representing a $516 million saving for the business community.
Cost of living gets some reprieve. Cost of doing business does not.
Businesses currently struggling under the weight of inflation, high interest rates, and labor shortage shortages won’t see any tangible improvement due to this budget.
Tax relief could have provided much-needed support or possible investment to boost productivity.
Property developers, who are facing particularly harsh economic conditions, have also felt the sting of increasing tax burdens over the past decade, hindering their ability to contribute to more affordable housing solutions; and we all know about the ongoing insolvency issues in housing construction companies.
The budget allocates funds towards housing development, renewable energy, and innovation, with $18 million dedicated to planning offshore wind generation and $40 million set aside for LaunchVic to support emerging entrepreneurs and enhance female representation in the start-up sector. The Geelong Chamber supports this much needed focus to turn around a declining start-up sector.
There is disappointment over the lack of funding for the Victorian Small Business Commission (VSBC). The Geelong Chamber has a strong relationship with VSBC, which plays a crucial role in resolving commercial tenancy disputes and helping businesses avoid costly legal action. Without increased support, the VSBC may struggle to meet the needs of the business community efficiently.
While the Victorian government’s budget makes considerable strides in innovation, is there enough tax relief and support for businesses grappling with economic pressures?
Business in the Greater Geelong Region will not see any significant benefits from this budget. Some maintenance to the Geelong Rail Tunnel, and funding for small-scale projects exist but certainly nothing that shifts the dial, and we are still waiting of Commonwealth Games funding to be fully available…
As Victoria moves forward, balancing fiscal responsibility with more economic investment, growth initiatives and business support will be essential to ensure the state’s long-term prosperity.
Jeremy Crawford
CEO
Geelong Chamber of Commerce.
