Tue 02 May 2017

budget-20172017 State Budget – “Getting on with the Job” … impact on the Civil Construction Sector

The Civil Contractors Federation Victoria CEO, John Kilgour, was invited today for a special briefing session conducted by the State Government and facilitated by the Minister for Finance, Robin Scott MP, on the release of the 2017-18 State Budget.

At a time where significant funding is being committed in the forward estimates towards major infrastructure projects that will drive social and economic growth in this state, the key theme from the State Government in their release of the budget was  ….. “Getting on with the Job”.

The cornerstone of the budget is an unprecedented investment in Family Violence with a record $1.9bn invested to help victims of family violence, with $2bn to the Victoria Police and law enforcement, $1.3bn into schools and education, $2.9bn into healthcare, $2bn in delivering “better roads” and $1.45bn as a Regional Rail Revival package; being key announcements.

With small businesses over the last 12 months growing by 15,000, a key announcement also was the bringing forward by 1 year of the planned payroll tax cuts threshold, previously announced.

Financial Metrics:

Victoria’s economy is one of the strongest in Australia, having experienced a 3.3% growth in 2015/16, which is significantly above the National average of 2.7% for the same period.

The state is in a solid financial position following the sale and lease of the Port of Melbourne, with strong financial surpluses of $1.2bn in 17/18 and an average of $2.4bn per annum to be delivered over the next 4 years in the forward estimates.  The State Government will restrict net debt in relation “Real Gross State Product” (GSP) to no > 6%, with a key focus on retaining the State’s AAA credit rating.

By March 2017, average employment in the State grew by 3.4%, against a National average of 0.6%.  In 2016, Regional employment grew by 2.1%, with a significant emphasis being placed in the budget on major infrastructure investment that will continue to support this growth.

The State Government was critical of the Federal Government’s in requesting our “fair share” of Commonwealth infrastructure grant funding.  Based on the latest Commonwealth Budget publications, Victoria will only receive 8.5% of allocated infrastructure funding to the States and Territories between 2015/16 and 2019-20.  It is stated in the budget papers that a decision by the Commonwealth to honour the National Partnership Agreement on Asset Recycling would only partially re-dress this in-balance.  Victoria would need to receive an additional $6.6bn over this period to achieve its population share of Commonwealth infrastructure grant funding.

A total of $9.6bn per annum on infrastructure over the forward estimates was announced in the State Budget, generating an additional 50,000 jobs.  $1.45bn will be invested in Regional Rail ($311m 39 new velocity carriages, $316m for maintenance, $44m to improve Shepparton connectivity, and $435m for Gippsland Rail). Other key announcements included $2.9bn into Health Care ($1.3bn in hospital services to meet 41,000 more admissions and 38,000 more emergency treatments), $2.4bn invested to boost the Victoria Police to reduce harm and put Victims first ($1bn to help bolster the justice system and $385m for emergency readiness), $333m for community sports, sporting infrastructure & events, a record $4bn being invested into Regional Victoria and $798m to protect our environment and manage water resources.

Key Infrastructure Sector Investment Announcements:

While announcements have been progressively made by the State Government over the last 6 months, and in particular over the last week, the following key sector announcements were made today that will have a significant impact on the forward works programs and projects within the Civil Construction Industry.

  1. Roads Sector

The Victorian Budget will invest about $2bn to upgrade regional roads and build new roads that reduce congestion, improves safety and connectivity.

  • $100m invested into the North-East Link (a link between the Ring Road and East Link or the Eastern Freeway) to complete critical design, planning and pre-construction work before signing contracts in 2019. Geotech work will start immediately, targeting 24 sites across the north-eastern suburbs of Melbourne,
  • $700m to complete the final 3 stages of the M80 Ring Road,
  • $300m to build the Mordialloc Bypass from Springvale Road, Aspendale Gardens to the Dingley Bypass,
  • $96.6m for stage 2 works on the Yan Yean Road upgrade,
  • $58.6m over the next 3 years for essential maintenance to the West Gate Bridge,

With a total of $500m allocated to rebuilding Victoria’s regional roads, the following investment announcements were made in this sector in regards to Regional Victoria:

  • $260m for maintenance covering more than 850kms of deteriorating roads,
  • $113m safety boost with 40kms of narrow arterial roads including $65.85m for a new South Western Victoria Road improvement program, and $37m for narrow seal roads in South West Victoria. An additional $10m is allocated to improve the Henty Hwy (the Green Triangle),
  • $50m to improve the South Gippsland Hwy at Koonawarra and almost $7m to construct a dual lane roundabout at Phillip Island / Woolamai Beach Road intersection in partnership with the Commonwealth,
  • $49m to deliver rural & regional roads upgrades,
  • $41m invested into stronger bridges to cater for High Performance Freight Vehicles (HPFV’s),
  • $10.2m to plan and undertake pre-construction works for the Shepparton Bypass. The future Bypass will include a second heavy vehicle crossing at the Goulburn River along with other key intersections,
  1. Rail Sector

The Victorian budget makes provision for up to $2bn to prepare the network for increased capacity created through the Metro Rail Tunnel Project, including the provision of high capacity trains and the continued removal of level rail crossings.

  • With $2bn already invested removing 10 level crossings and 13 well under construction, a further $846m has been brought in the budget to accelerate and deliver a total program of 28 removals by end of 2018,
  • With a significant investment in the Melbourne Metro Rail tunnel project, $187m is allocated to shift stabling from Carrum to build a new stabling yard at Kananook on the Frankston line,
  • $85m to support preparing the rail network for delivery of the Metro Rail tunnel project,
  1. Water Sector

The Victorian State Budget will invest $116m over the next 3 years to improve water security for local communities, support farmers, and improve the health of our waterways across the State.  Key announcements include:

  • $60.6m which will be contributed towards sustainable water planning, providing security and creating confidence in water entitlements for farmers and other users,
  • $13.8m will also be directed to help more efficient uses of the water grid,
  • $7m to drought proof the Royal Botanic Gardens in both Melbourne and Cranbourne,
  • $3.5m for waterways and storages (includes Anglesea River estuary),
  • $5.2m to the Murray Darling Basin Authority to deliver environmental programs in Northern Victoria,
  • $2m for a new State Environmental Protection Policy, which will protect groundwater & surface water from pollution,
  • $5.7m to apply a science water management and make the water sector carbon neutral,
  • $1.5m to promote innovation through Water Sensitivities Cooperative Research Centre,
  • $1m towards the Yarra River and its’ parklands,
  • $1m for a rural drainage strategy in area such as South West Victoria, Gippsland and Northern Victoria

Other key announcements of interest to CCF Members are:

  • $60m into planning for growth, including $11.6m to establish Land Use Victoria, which is designed to ensure the community gets better value from the Government’s land portfolio and $6.5m to deliver the Yarra River Action Plan,
  • $42.5m over 4 years to fund the Victorian Gas Program,
  • $50m over 2 years to help build important community projects across Melbourne’s outer suburbs,
  • $8.2m boost for Apprentice Support Officers. CCF is actively engaged with the Government I providing appropriate skilled pathways for employment given the State Government’s Major Projects Skills Guarantee which is designed to promote 10% of the work on Victoria’s Major projects in undertaken by apprentices and trainees.  CCF looks forward to making further announcements regarding this in the near future,
  • $332.8m to improve community sports facilities.

As the peak industry body representing the Civil Construction industry, CCF Victoria welcomes the release of funding and continued investment in major infrastructure projects announced in the 2017/18 State Budget.

Given the current economic conditions, this sustained and accelerated investment in major infrastructure projects is needed to “keep pace” with population growth in this State and to build confidence across the civil construction sector.

John Kilgour

2 May 2017