Abbott can’t sustain Victoria’s raw deal in budget

Date
    May 19, 2015 - 12:00AM
    The Age

Tony Abbott thinks we're mugs. Deflecting attention from a budget that left Australia's second biggest state with only a fraction of Australia's infrastructure spending, he said he was so committed to the East West Link that he "gave Victoria $1.5 billion to actually get cracking".   :(

It's true, he did give Victoria $1.5 billion for the East West Link in his first 2014-15 budget ($500 million of which was diverted from other Victorian projects). But in extraordinarily odd timing, he handed it over in 2013-14, just ahead of the year to which that budget referred.

    The manoeuvres not only made Labor's last budget look bad, they made the Coalition's first two look good. 

Like all budgets these days the 2014-15 budget was handed down in May. The 2013-14 financial year had seven weeks to run. The budget shovelled out the money immediately, before 2014-15 began and well ahead of when it could possibly have been needed. The East West Link contract wasn't signed until September.

The immediate payment had nothing to do with enabling Victoria to get cracking. It had everything to do with cooking the books.


Labor's last budget covered 2013-14. By shovelling out the East West Link money before 2013-14 ended he loaded up Labor's last financial year with extra spending. The 2013-14 deficit climbed from a forecast $18 billion to $48.5 billion. A lot of the deterioration was due to the collapse in commodity prices. The iron ore price slid from $US124 to $US93.

The rest was due to higher spending, most of it tacked on to Labor's budget by the Coalition. It directed $8.8 billion to the Reserve Bank within weeks of taking office, pushing up "Labor's" deficit by $8.8 billion. Then it directed $1.5 billion to Victoria well before it was needed.

The manoeuvres not only made Labor's last budget look bad, they made the Coalition's first two look good. Having funded the East West Link in 2013-14 the budget didn't need to fund it in 2014-15 (nor as it turned out in 2015-16) and it didn't need to find several billions in 2014-15 to top up the Reserve Bank's reserve fund. Indeed, with the reserve fund topped up the bank resumed paying dividends, giving Abbott $1.235 billion from its performance in 2013-14; half of which he directed to the 2014-15 budget, and half of which he held over until July in order to boost the 2015-16 budget.

And the early gift dressed up Denis Napthine's final Victorian budget. Taking it back will harm Daniel Andrews' first one.

It's particularly irksome that he gave Andrews no notice that he planned to take it back. Victoria's budget, delivered a week before the federal budget, is based on the assumption that the $1.5 billion can stay.

Abbott is using Victoria as a piggy bank. He paid it $1.5 billion at a time when it would hurt a Labor budget. He wants to take it back out at a time when it will help the Coalition's. He has already booked it in the budget as having been returned.

The billboards he is sending around Melbourne's eastern suburbs are a smokescreen. "Stuck in traffic! Blame Labor" they say. What they don't say is that the East West Link is such a bad project that a conventionally-constructed benefit cost analysis finds it returns just 45 cents for every dollar it costs. What they don't say is that the $1.5 billion could be better spent on projects whose returns exceed their costs. What they don't say is that Victoria voted against the East West Link in an election Abbott himself described as "a referendum on the East West Link".

Victorians voted for a rail project, one Abbott ought to be prepared to submit to Infrastructure Australia along with the East West Link. After all, that's what the policy he took to the federal election said he would do: "We will require all Commonwealth-funded projects worth more than $100 million to undergo a cost-benefit analysis by Infrastructure Australia to ensure the best use of available taxpayer monies," it said.

By refusing to do what he said he would do he is setting up a stand-off between Victoria and the Commonwealth, one that will enhance his budget's bottom line for as long as it goes on. If he can drag it out another year it will enhance the next budget's bottom line as well.

But he'll have to cave. Victoria has 25 per cent of Australia's population but is getting only 12 per cent of its infrastructure funds. Billboards and bluster can't obscure that forever.

And there are plenty of other  sleights of hand in Abbott's second budget. He is advancing $5 billion over five years for non-commercial infrastructure facilities in Australia's north, the kind the banks won't touch. Because the $5 billion will be "lent" rather than spent, it won't add to the most widely quoted measure of the budget deficit. But loans for non-commercial ventures are (by definition) highly likely to never being repaid. Eventually some, maybe even most, of the $5 billion will find its way on the deficit. But not now. That's a problem for the longer term. Right now Abbott wants to us to think he's fixing the budget.

Quote:

It's true, he did give Victoria $1.5 billion for the East West Link in his first 2014-15 budget ($500 million of which was diverted from other Victorian projects). But in extraordinarily odd timing, he handed it over in 2013-14, just ahead of the year to which that budget referred. The manoeuvres not only made Labor's last budget look bad, they made the Coalition's first two look good.  Like all budgets these days the 2014-15 budget was handed down in May. The 2013-14 financial year had seven weeks to run. The budget shovelled out the money immediately, before 2014-15 began and well ahead of when it could possibly have been needed. The East West Link contract wasn't signed until September. The immediate payment had nothing to do with enabling Victoria to get cracking. It had everything to do with cooking the books. Labor's last budget covered 2013-14. By shovelling out the East West Link money before 2013-14 ended he loaded up Labor's last financial year with extra spending. The 2013-14 deficit climbed from a forecast $18 billion to $48.5 billion. A lot of the deterioration was due to the collapse in commodity prices. The iron ore price slid from $US124 to $US93. The rest was due to higher spending, most of it tacked on to Labor's budget by the Coalition. It directed $8.8 billion to the Reserve Bank within weeks of taking office, pushing up "Labor's" deficit by $8.8 billion. Then it directed $1.5 billion to Victoria well before it was needed. The manoeuvres not only made Labor's last budget look bad, they made the Coalition's first two look good. Having funded the East West Link in 2013-14 the budget didn't need to fund it in 2014-15 (nor as it turned out in 2015-16) and it didn't need to find several billions in 2014-15 to top up the Reserve Bank's reserve fund. Indeed, with the reserve fund topped up the bank resumed paying dividends, giving Abbott $1.235 billion from its performance in 2013-14; half of which he directed to the 2014-15 budget, and half of which he held over until July in order to boost the 2015-16 budget. And the early gift dressed up Denis Napthine's final Victorian budget. Taking it back will harm Daniel Andrews' first one.

This is why the Liberals cannot be trusted. They spent billions, then shifted the blame onto Labor. That RBA money? Spent by Liberals, blame shifted onto Labor. East West link? Really dodgy accounting all around. Five different budgets slanted the Liberals' way by some accounting trickery.

They may think they are going to gain seats in Victoria with this nonsense. Guess again, meatheads. Life in Victoria under the Federal Liberals = massive underfunding of infrastructure. If the Liberals think that this will gain them seats in Victoria, they are terminally mistaken.

Thank heavens the grown-ups are back in charge.

I have never seen such a shambles over infrastructure between the States and the Federal Government....WA gets funding for a sports stadium and foreshore redevelopment whilst the new Victorian Government gets funding withdrawn....To top it off WA is getting a further 600 million dollars from Mr Abbott....Victorians have every right to be pissed off with Mr Abbott, whilst West Australians are being sucked in by trinkets!!!

>:( >:( >:(

philperth2010 wrote on May 19^th, 2015 at 5:56pm:

I have never seen such a shambles over infrastructure between the States and the Federal Government....WA gets funding for a sports stadium and foreshore redevelopment whilst the new Victorian Government gets funding withdrawn....To top it off WA is getting a further 600 million dollars from Mr Abbott....Victorians have every right to be pissed off with Mr Abbott, whilst West Australians are being sucked in by trinkets!!! >:( >:( >:(

Yeah I agree, WA shouldn't have got any of that. Full on retards over there.

philperth2010 wrote on May 19^th, 2015 at 5:56pm:

I have never seen such a shambles over infrastructure between the States and the Federal Government....WA gets funding for a sports stadium and foreshore redevelopment whilst the new Victorian Government gets funding withdrawn....To top it off WA is getting a further 600 million dollars from Mr Abbott....Victorians have every right to be pissed off with Mr Abbott, whilst West Australians are being sucked in by trinkets!!! >:( >:( >:(

Shorten's budget reply speech had an interesting proposal to take the politics out of infrastructure funding. It is obvious that Victorians are getting shafted by this government, and Victorians will return the favour at the next election.

If you thought WA's beef with the GST distribution has them pssed off, wait until Victorians start getting up in arms about being similarly dudded with infrastructure funding (16%).

Abbott's already in trouble in Victoria...

East-West Link stoush a seat loser, risky move for PM (Herald Sun, 13/5/15)

Quote:

MAKING Victoria pay back the $1.5 billion we were given for East West Link is all about trying to save seats in Melbourne’s east at the next federal election. It is no secret that the Abbott Government is in deep strife in the eastern suburbs. In 2013 the Liberals captured Deakin, which takes in Blackburn, Mitcham, and Forest Hill, and La Trobe, which includes Croydon, Ferntree Gully and Ringwood. It also had big swings in its seats of Aston (Rowville and Scoresby) and Casey, which stretches into the Yarra Valley. Less than two years later the MPs for Deakin and La Trobe should be brushing up their LinkedIn profiles. Unless there’s a big change in the political weather they’re not going to be re-elected. The Libs should retain Aston and Casey but the expectation is they will get a massive hair cut. It’s a sign of how badly Tony Abbott is travelling out that way that he would contemplate the risky move of picking a fight with the Andrews Government over infrastructure funding. State governments usually have a big home ground advantage when it comes to winning the public’s sympathy in fights with Canberra over money. It’s risky too because it was the Prime Minister himself who called the last state election a referendum on East West. And it isn’t as though the feds have a great story to tell about their infrastructure spending here. At the Budget lockup in Canberra on Tuesday the Government handed out a list of the “key” infrastructure projects it is kicking money into around the country. Our share of this bonanza worked out at 5.4 cents in every dollar. When you throw in Roads to Recovery and other odds and sods, our percentage of federal infrastructure spending rises to 16 per cent, which is not very much when you consider that almost one in four Australians live here. All of this is less important apparently than giving Liberal MPs an issue to campaign on. Or rather, it is a recognition of the brutal truth that it hasn’t got anything else to offer them.

I'm so used to it that I think I would be dissapointed if one day the libs tried being honest. They're just a bunch of lying thieving charlatans 

Rider wrote on May 19^th, 2015 at 6:02pm:

philperth2010 wrote on May 19th, 2015 at 5:56pm: I have never seen such a shambles over infrastructure between the States and the Federal Government....WA gets funding for a sports stadium and foreshore redevelopment whilst the new Victorian Government gets funding withdrawn....To top it off WA is getting a further 600 million dollars from Mr Abbott....Victorians have every right to be pissed off with Mr Abbott, whilst West Australians are being sucked in by trinkets!!! >:( >:( >:( Yeah I agree, WA shouldn't have got any of that. Full on retards over there.

I know look who the premier is and the state of the finances , he would fit right in with the economic incompetents at LIB HQ in canberra