The impending stamp duty bust in Victoria is already crimping public spending, with the Andrews Government forced to tighten its belt ahead of pay negotiations with the public service. From The ABC:
Several public sector workplace agreements expire this year with negotiations on many, including for 4,000 paramedics and ambulance support staff, set to begin soon.
Treasurer Tim Pallas met with union bosses recently and senior sources said he offered them 2 per cent a year for new enterprise bargaining agreements, which is below the current cost of living increase…
The 2 per cent offer is due to the slump in house prices, which have dropped by more than 9 per cent in the last year...
“The Treasurer has already foreshadowed a reduction in stamp duty revenue following a cooling of the property market — that will not stop the Government honouring all of its election commitments in full.”
Stamp duty and property taxes are the biggest tax revenue for the state, while public sector wages are the biggest expense.
Last December’s mid-year budget update revised stamp duty taxes down $604 million to just under $6.5 billion, since then the property market has continued to slow.
The mid-year Budget Review for Victoria was hopelessly optimistic with regards to stamp duty receipts, forecasting only a minor and temporary slowdown:
Since then, the crash in both housing transaction volumes and prices has deepened:
As the Victorian property market deteriorates even further, this inevitably means that stamp duty receipts will crash, wiping billions in revenue a year from the State Budget.
Thus, the Victorian Budget is facing a possible meltdown as crashing stamp duty receipts meet massive population-related spending commitments. This will likely then crimp infrastructure and public spending as austerity arrives.