Economic recovery stronger and faster than anyone expected: Victorian Treasurer

Despite the cost of the recent lockdown in Victoria, the Victorian economy has strong foundations for economic recovery, Victorian Treasurer Tim Pallas told an audience at CEDA’s State of the Nation.

“We are all a little surprised at the resilience of the national economy and Victoria seems to be well and truly bouncing back very strongly,” Mr Pallas said.  

The Treasurer said we are yet to see signs of wage growth, despite recent data showing the Victorian economy added more than 250,000 jobs since September last year.  

“We are not seeing a lot of signs around wages pressure I have to say,” he said.

“The expectation is you would have to see a pretty prolonged level of low unemployment together with strategic skill shortages that go on for some time before you would see that play out in terms of wages across the economy.”

Mr Pallas acknowledged the challenges that low population growth would present to the Victorian economy in the next few years but said it also presented opportunities.

“The three things that drive an economy and its growth are population growth, productivity growth and participation in the labour market, we need to focus on the other two elements,” he said.

“What are the interventions and activities that government can make to get greater performance out of the economy and go further effectively with an expectation that population is not going to be one of those central pillars for at least a couple of years?

“The opportunity here is that for a long time in Victoria we’ve been playing catch up on infrastructure. The embedded demand for infrastructure has meant that governments have had to move at a cracking speed.

“Now we can take the opportunity of lower population growth as an opportunity to deal with some of that backlog – get on deliver the infrastructure that can provide for the needs of a growing community.”

Tax policy “growing the economy from the bottom and middle out”

In response to a question about tax increases in the recent Victorian Budget, Treasurer Pallas referenced recent comments from US President Joe Biden on the need to grow the economy “from the bottom and middle out”.

“We need to recognise who is doing relatively well out of this economic event – believe me we have seen some pretty substantial wealth appreciation occur…and who is not doing so well,” he said.

“We know who is not doing so well: they tend to be people in insecure forms of employment and women and young people tend to make up a disproportionately high proportion of those who have been negatively affected by this event.”

The Treasurer characterised the tax changes as “fair and progressive.”

“We are not about trying to undermine people’s right to run businesses and make a profit but recognising that we do have to put in place measures for fiscal repair,” he said.

“I think we are the only government so far that has demonstrated any interest so far in budget repair through our fiscal settings.”