The state of Victoria: where we are, where we’re heading, and what we need to get there
With the state of Victoria celebrating the defeat of our second wave of COVID-19 and moving out of lockdown, we can now begin our journey to ‘COVID-normal’. Like any great journey, we must know where we are before we can move forward.
Brendan Britten, Managing Partner at Pitcher Partners in Melbourne looks at the impacts of the extended lockdowns and the relative positioning of Victoria’s economy compared to the rest of Australia. Through these unique insights, Mr Britten identifies the opportunities for Victoria and how the upcoming State Budget can support our economic recovery and prosperity.
The Federal Budget released in October has left the field open for the Andrews Government to develop a strategy for Victoria’s recovery. The upcoming State Budget has the potential to include targeted measures to revive regional Victoria and simultaneously bolster metropolitan Melbourne as Australia’s leading city for tourism, sports, entertainment, arts, culture, major events and population growth.
Jobs and growth opportunities
The consumer discretionary sector in Victoria – which includes retail and hospitality – contributes around 10 per cent to 15 per cent of total state output. The consumer discretionary sector also remains one of the largest employers, with around 30 per cent of Victoria’s employees.
The wide variety of businesses that form the industrials market sector (everything from professional services to large sections of the manufacturing industry) remains the largest employer of Australians. That sector’s high share of total employment is more equal with its contribution to the broader economy.
For this reason, Pitcher Partners believes that government support for a reinvigoration of Victoria’s manufacturing sector into a modern vibrant industry can spread opportunity across both metropolitan and regional Victoria.
Victoria’s official unemployment rate is lower than most states, however, the underemployment rate is much higher. While Mr Britten fully expects Victoria to return to the pack over the medium-term, recovery will happen at differing rates across the state and its industries.
Prospects for Victoria
Looking ahead to economic recovery and growth, Mr Britten says encouraging businesses to invest in capital expenditure is crucial to stimulating economic growth at a domestic level.
Privately-owned and family businesses are presently focused on recovery growth now an end to lockdown is in sight. But these businesses need the incentives and confidence that the demand for their products or services will be there.
Pitcher Partners and the VCCI believe supporting local businesses will provide a considerable boost to confidence and activity across both metropolitan Melbourne and our regions.
The Federal Budget included several sweeteners for businesses, and while investment write-offs and workplace subsidies are welcomed, all eyes are now turning to the upcoming State Budget to support these measures with practical reforms that lower business costs, stimulate investment and grow jobs.
Small and medium-sized businesses need strong order pipelines and the certainty and confidence to hire new workers. The State Budget has a not to be missed opportunity to spur the game-changing investments and job creation needed to ensure Victoria is back on the path to growth.
The role of population growth and infrastructure investment
One of the biggest challenges the State Government will face preparing the 2020 Budget will be the need to keep the Melbourne CBD flourishing while simultaneously supporting suburban and regional growth.
Historically Victorian construction activity has benefitted from a strong infrastructure pipeline and supporting measures such as the regional First Home Owners Grant, which, combined with the Federal Government’s HomeBuilder Scheme, contributes to a total $45,000 for those building a new home in those areas. However, the current ‘big build’ will soon be complete and it’s now time to ask - what next? Planning for and building the infrastructure we will need in 2030 and beyond will make Victoria a better place to live and work, while stimulating jobs for local small and large businesses across the state
Border restrictions have resulted in a sharp fall in international migration, international and intersate visitors and a damaging drop-off in Melbourne’s once high rate of population growth is now well below trend, resulting in a major cutback in spending and economic activity across the state economy. This has been exacerbated by a significant fall in international visitors.The Federal Budget also scaled back the forecast population of Melbourne for 2022 by 400,000, predicting the first fall in net interstate arrivals in more than 12 years. A major catalyst for this collapse comes from the evaporation of international students.
Melbourne’s population is normally bolstered by more than 280,000 international students at any given time as well as more than 13 million domestic and international overnight visitors. With the loss of international students, the loss of tourism and far fewer workers coming into the city, Melbourne’s CBD has copped the brunt of the economic impact of COVID-19 lockdowns.
More importantly, without ongoing population growth, it becomes harder to underpin the density of the CBD. Without that critical mass, businesses that would normally service office workers, students and tourists in the CBD will find they struggle even when we enter a state of ‘COVID-normal’.
Mr Britten expects the Melbourne CBD to be vacated again where suburban offices may experience a boom. Due to fears of COVID-19 and congested public transport, employers will be urged to provide a workplace which employees can drive to and park.
The avoidance to work in the CBD will then have a flow-on effect to businesses such as childcare centres in the suburbs who will see an increase in demand.
The value of education
Education is Victoria’s largest export industry, accounting for around 20 per cent of the State’s exports. Education and training also supports countless other businesses and sectors, such as housing construction and tourism.
In the upcoming State Budget, it will be critical for the Victorian Government to provide strong support for not only universities but also TAFEs – predominately through funding of infrastructure projects and student placements for both metropolitan and regional TAFEs.
The VCCI recognises the importance of the TAFE sector and its role in reskilling the workforce for the future. We look to the state budget to provide further support and align outcomes, education and delivery with industry needs.
While support will be needed to lure international students back, local school leavers who will be looking for options to support their future employment potential also need stimulus.
To ensure that Victoria can meet its future labour needs and fill areas that have skills shortages, including in industries which will establish and grow coming out of the COVID pandemic, supporting the education industry will be of critical importance for the upcoming State Budget.
Advocacy and campaigns
For more information on the Victorian Chamber’s advocacy work and current campaigns, along with submissions and taskforces, visit the Policy and Advocacy section of the VCCI website. If you have any questions or would like to be involved in our advocacy work, please contact email@example.com.
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