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Victorian workers will have to wait years for wages to start rising again, jobs in education, travel and the arts will remain scarce while Melbourne’s economic recovery will continue to lag until international borders re-open.
Thursday’s state budget papers tip the state’s households – buoyed by surging house values and savings accrued during the pandemic – to continue spending, driving a massive 6.5 per cent expansion in the state’s economy in the coming financial year.
But further delays to the world’s recovery from the COVID-19 pandemic – and a slow global vaccine rollout – pose a grave risks to the state’s economy with the potential to plunge Victoria back into deep and lasting recession.
Questions will also linger over the potential drag on growth from the $5.4 billion in taxes imposed on the local economy in the next four years through the new mental health levy on big businesses wage bills along with increases to stamp duty and land tax.
The state budget papers also show regional Victoria surging ahead of Melbourne in jobs, house price growth and building starts in what Treasurer Tim Pallas called an “amazing” non-metro economic performance.
The state’s job market is expected to continue its recovery to pre-pandemic levels with the state-wide unemployment rate tipped to come down to 5.5 per cent this year, according to the budget papers.
Budget papers are organised at this year’s state lockup.Credit:Joe Armao
Wages though are tipped to remain relatively flat until at least 2023 with only “modest” improvements forecast beyond that point.
Those statewide figures mask a big disparity between town and country. Melbourne’s jobless rate was still at 7 per cent while unemployment in regional Victoria was well below the national average in March of 5.5 per cent.
Country Victoria also looks likely to be the place to be in the coming years for house prices and home building with values soaring by nearly 13 per cent in the seven months to April compared to 8 per cent in Melbourne.
The regions are proving a magnet for young house hunters with 78 per cent of first home purchasers opting for country or outer-metropolitan locations in the 12 months to March.
But the surging regional housing market has a downside for renters with asking rents in the regions increasing by more than 12.5 per cent in the country between March 2020 and March 2021 against a decline in city rents of 6 per cent in the same period.
The regional economic miracle has not extended to some traditional rural sectors, the budget papers note, with jobs in fishing, agriculture and forestry struggling to get back to pre-COVID levels.
The Department of Treasury and Finance says Victorians are continuing to spend driving retail sales back above pre-pandemic levels – and car sales doubling in the last three months of 2020 – although general consumer spending has yet to recover.
Services, particularly in the transport, hospitality, recreational and cultural sectors are providing much of the drag on consumer spending, the budget papers show, with no guarantees households will feel confident enough to keep spending in the post-COVID period.
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