Victoria tipped for population boom despite debt, taxes and housing strains
One of the most perplexing things in this year’s budget was the notion that Victoria is set up for a boom year, at least in population terms.
For most of us and particularly those living in Victoria, this seems incompatible with our lived experience with the state being heavily indebted, heavily taxed and struggling to cope with housing and population growth.
What the budget showed is that Victoria will be the destination of choice particularly for international migrants but also those from other states.
High property taxes lead to lower property prices
In part this might be explained by the fact that Victoria’s high property taxes have made it a cheaper place to buy and rent.
The bottom line, however, is that Victorians have nothing to complain about from the Federal Budget which will push an extra $14.45 billion into the state over the next four years due to its unlikely position as the country’s fastest growing state.
Historically, Victorians have been justified in complaining that they have been shortchanged in the funding of public hospitals, schools, and particularly major infrastructure.
Extra money flowing in
That no longer seems to be the case with Victoria’s total payments from the Commonwealth up by an average of $3.6 billion a year between 2024 and 2028 – adding up to an extra $14 billion.
This is great news for Victorian premier Jacinta Allan and treasurer Jaclyn Symes who have delayed releasing their state budget until after the federal election.
Before the federal budget was announced Victoria expected to receive $45.36 billion internal payments for 2025/26 but that has been boosted to an impressive $50.67 billion.
That extra money will certainly come in handy as the extra population in the state increases demand for schools and hospitals.
Queensland gets the big infrastructure deal
Queensland is the state which obviously did best on infrastructure with $7.2 billion promised to upgrade the Bruce Hwy but Victoria did not do badly with a $2 billion contribution towards the $4 billion dollar overhaul of Sunshine station which will enable the railway link to Melbourne airport, along with a $1.1 billion upgrade to the Western highway and a further billion dollars of road funding for Melbourne suburbs.
In rough terms Victoria has done about as well as NSW for infrastructure spending, something that has rarely been the case in the past.
Of course, it pays to be cynical when considering government funding at election time with politics obviously playing a very big part in this budget.
Melbourne seats vital for both major parties
To stay in power federally, the Labor Party will need to hang on to most of its 24 Victorian seats, many of them in Melbourne.
To seize back power, Peter Dutton’s opposition will need to win back some of those marginal Victorian seats such as Aston, Chisholm, McEwen, and Dunkley.
Helping Dutton will be the unpopularity of the state government in Victoria which has run up a projected debt of $187.8 billion which it is servicing through an unpopular range of new land and other property taxes.
Even with the extra federal money, Victorian treasurer Jaclyn Symes will struggle to release an appealing state budget and will need to unwind some of the most notable excesses left by her predecessor Tim Pallas.
The extra money will be quickly and eagerly gobbled up within the state budget, although there must be some doubt about the Australian Bureau of Statistics population forecast which shows that Victoria is Australia’s fastest growing state with an extra 544,000 people expected to arrive before the end of 2029.
While federal funding generally arrives with few caveats, it would not surprise if the engine room of Victoria’s population growth starts to misfire if net overseas migration starts to slump and the big influx of students that flocked to Australia after the COVID pandemic stop to finish their courses and go home.
However, Victoria is still expected to see a population rise as fewer people move out of the state.
Ironically, Melbourne’s relative failure is its biggest strength, with the southern capital being the only large city market in Australia where house prices fell in 2024 at the same time as other capital cities saw double digit increases in their house prices.
The result is a prediction that Victoria will be the only state forecast to have an increase in net interstate migration, with 2,800 new arrivals predicted in 2025-26 and 3,700 arriving in 2026-27.