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Discussion Starter · #1 · (Edited)
This huge Govt investment should help to keep the Victorian economy bubbling along for the next few years.

Infrastructure dollars set to flow

Mathew Murphy
June 12, 2007

CONSTRUCTION, consultancy and IT businesses will be big winners as the Victorian Government launches its $13 billion infrastructure program next month.

Treasurer John Brumby announced the four-year upgrade program in last month's state budget, following last year's election commitments.

While some reject the Treasurer's claim that the spending will be a record, arguing that the Bolte government borrowed and invested far more on infrastructure relative to the size of the economy, it does mean a capital works outlay of a net $3.3 billion for 2007-08.

With more than 170 election promises and capital commitments to be delivered between July 1 this year and 2010-11, a lot of money will begin floating around town as tenders start to filter out.

Included in the $3.3 billion infrastructure spending for next financial year will be $555 million to modernise or rebuild 131 schools, $500 million for 1550 affordable houses and 800 rental properties, and $464 million towards rebuilding hospitals and health facilities.

About 60 per cent of the $13 billion program will be funded from the cash operating surplus, while net debt is forecast to rise from $3 billion to $8.8 billion by 2011.

Darrin Grimsey, a partner with Ernst & Young's project finance advisory, said Victoria was experiencing a "sellers' market" due to the strong economy and infrastructure projects already under way.

Mr Grimsey said the Government would have to tender competitively to secure the services of businesses that were "already in demand and able to pick and choose projects".

"Activity is probably the strongest that (business) has ever seen," he said. "The Government needs to make the offers attractive for business to tender and tender hard because at the moment it is a sellers' market. The whole construction industry is flat out."

Mr Grimsey said he expected small and medium businesses to benefit most from the infrastructure spend, particularly from the schools rebuilding program, with the benefits to flow through the economy.

"Initially it will be construction that will see the infrastructure spend head their way, and then those involved in operation and implementation," he said.

"Bilfinger Berger (Australia), Leighton, Probuild, those top-tier companies will really be able to pick and choose what they want, if anything. IT suppliers such as Siemens, Motorola, Toshiba could also expect to be in the running. Consultancies as well will undoubtedly pick up extra work.

"We as taxpayers will reap the benefit of that infrastructure budget at the end as long as the Government is wise about how it spends that money."

Opposition state development spokesman David Davis said Victoria was destined to experience further delays while waiting for infrastructure improvements that would be paid for by taxpayers.

"The delay by this Government in starting to focus now on Victoria's infrastructure needs means there will be congestion at a national level in terms of the delivery of infrastructure and Victorians will pay top dollar for every infrastructure asset they purchase from now on," he said. "So, not only will they wait longer for it but they will pay more."

Mr Brumby said Victoria was well placed to deliver the infrastructure program.

"There is no doubt that across the world there is huge investment occurring in infrastructure, and that is adding to infrastructure pressures and costs," he said.

"I've just returned from Dubai, where there is 27 per cent of the world's cranes; after that I went to China, where there is nearly 50 per cent of the world's cranes. So, there are huge pressures around the world, but the world is coping pretty well with them."


This is also great news for the housing building industry,

FIRST-HOME buying in Victoria has risen to its highest level for two years, although families taking the plunge appear to have been largely locked out of the inner city by soaring prices.

State Treasury figures to be released today show that in May there were 3613 applications for the First Home Bonus and 3924 applications for the First Home Owner Grant.

It was the highest monthly result since June 2005.

The figures follow sharp criticism from the Federal Government and others that soaring State Government stamp duties are pushing home ownership out of reach for thousands of prospective buyers.

Victorian Treasurer John Brumby said the figures showed that Victoria offered first-home buyers a "very competitive" package, particularly compared with NSW and Queensland.

"I don't think there is any evidence that stamp duty rates are holding back the market. In fact, the market is quite strong," Mr Brumby said.

First-home buyers in Victoria purchasing an established property can claim benefits from the two schemes of up to $10,000, while those buying a newly constructed dwelling are eligible for up to $12,000.

So far this financial year the First Home Bonus scheme has paid out about $104.5 million to 33,228 applicants, while the First Home Owners Grant has paid out $249 million to 35,571 people.

However, much of the take-up has occurred in and around the so-called metropolitan growth corridors. The Werribee region (postcode 3030) recorded the highest number, with 830 applications. That was followed by the Cranbourne area (postcode 3977), with 793 applications, Caroline Springs and Deer Park, Hoppers Crossing and Craigieburn.

In contrast, first-home ownership in inner-city suburbs has slowed to a trickle.

Out of the top 25 postcodes for first-home ownership in May, none were in inner-city areas.

In the top 50 there were three: the St Kilda area (postcode 3182) ranked 26th, Melbourne, (postcode 3000) ranked 27th, and Brunswick (postcode 3056) ranked 45th.

The figures follow a report by Liberal Party think tank the Menzies Research Centre claiming that State Government stamp duties represent one of the greatest barriers to housing affordability and have served to lift Melbourne rental prices by $11 a week.

The claims were seized on by Treasurer Peter Costello, but vigorously contested by Mr Brumby, who argued that net State Government charges for first-home buyers have fallen by 84 per cent.

He said that in 1999-2000, the median price for a house purchased by a first-home buyer in Victoria was $166,438 and net State Government charges totalled $6143.

In 2006-07, the median price for a house purchased by a first-home buyer is $255,000 and net State Government charges total $960.

A separate paper from the Housing Industry Association found national housing affordability at its lowest level since 1984. It said mortgage repayments were now soaking up about 28.1 per cent of the average Melbourne first-home buyer's income.

Proud "Pricktorian"
558 Posts
Very good news indeed! Let's hope the bubble doesnt burst though...

Watch my Chops
6,075 Posts
^ I guess it's a state based judgment to what Victoria needs to do. Nationally that would be the case, but if this is the slow down for Victorias economy somthing needs to be done for the future upturn even if it gets worse.

1,788 Posts
Discussion Starter · #5 ·
^ I guess it's a state based judgment to what Victoria needs to do. Nationally that would be the case, but if this is the slow down for Victorias economy somthing needs to be done for the future upturn even if it gets worse.
I think you will find the Vic Government wants to keep the strong economic momentum that the State is experiencing ATM continuing for the forseable future.
Thats why its prepared to spend billions on local projects ( schools, hospitals roads etc) all around the State.
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