what to look for in the state budget

Parliament-of-Victoria-Melbourne-.jpgThe 2014-15 Budget will be released on Tuesday 6 May 2014.

State budgets define the priorities of the government of the day. They speak to what type of world view that government holds. Will next weeks budget be another indication that we have a Coalition that is in denial about the reality of climate change, instead clinging vainly to the technology of the 20th century in the hope it can realise the dream of ‘clean coal’?

Or, in light of the massive impacts of the Hazelwood mine fire, will it use this budget as a chance to draw a line under the policies of the past, one where it starts to acknowledge the true economic costs of climate change and commits to the transition to clean and renewable energy that we so urgently need?

Given the policies implemented to date, there is little hope that the Coalition will shift it's funding priorities in this budget. It is expected to be 'infrastructure heavy' as the government seeks to shift the perception in the community that it has put a lot of it's funds into a single project, the East West tunnel.

But this denial will not make climate change go away. Nor will it lesson the economic impacts that global warming is already having on the Victorian economy. In the Budget Update for the 2013/14 financial year, the Treasurer noted the various factors that impact on the overall budget: things like population growth, trends in the mining sector, consumer confidence, the property market and so on. What is missing from Mr O’Brien’s assessment is the growing impacts of climate change.

At best, the Budget Update notes that:

Another key risk is growth in demand for government services exceeding current projections. This can occur, for example, … in response to unforeseen events such as natural disasters, including bushfires and floods. (p 35)

The 2013-14 Budget Update includes a contingency provision to mitigate the impact of these expenditure risks, without making a specific allocation to natural disasters.

This is despite Victoria having suffered another severe summer, with large wildfires and a prolonged heatwave that put significant strain on the public health system. 2013 was the hottest year on record in Australia.

In January 2014, Friends of the Earth (FoE) released a report that showed that the financial cost to governments and the community in Victoria from climate-related natural disasters was $19.937 billion dollars over a ten year period from 2003 to 2013. It tracked the known costs of responding to, and recovering from wildfire, floods, heatwaves and storms. This included an amount of $6,762.87 million in direct government costs. Because the specific costs of government response are largely not itemised in reports from government departments, the figure is likely to be deeply conservative.

One of the recommendations of the FoE report was that the government start to itemise the costs of disaster response and recovery, so that it has a clear indication of how much they are impacting on the state’s budget. Yet this information is still largely hidden in government reports and budget documents. For instance, Ambulance Victoria says it received a 700% increase in the number of call-outs for cardiac arrests on the hottest days of the 2014 heatwave. These impacts place considerable stress on the ‘surge capacity’ of our public health services, yet are simply subsumed into the general health budget.

Natural disasters also impose a significant cost on Local Government Authorities. As one, example, the Alpine Shire bore a heavy burden in terms of resources and staff time in responding to a major fire and subsequent flooding in the north east of the state in 2013:

“Emergency response is a key responsibility of Council’s outdoor crews, and the most recent Harrietville Alpine North fires in summer 2013 and subsequent flooding events in Harrietville in late March 2013 placed heavy demands on Public Works and Services staff. Council staff worked tirelessly to reinstate flood-affected public areas in time for the Easter tourist period, to assist the Harrietville community to recover after the impact of the fires”.

(p 35)

During the Harrietville fire, the tourism-dependent towns of Dinner Plain, Mt Hotham and Harrietville were effectively cut off, with huge impacts on local economies and individual businesses.

The private costs borne by business from natural disaster events can be considerable. For instance, research done for the City of Melbourne estimates that

“the extreme heat experienced in Melbourne between 14 and 17 January this year is estimated to have cost businesses in the municipality approximately $37 million in lost revenue”

These types of local government and cost-of-revenue impacts are not included in our 10 year figure of $20B.

In the State budget documents for the 2013/14 financial year, the following costs were itemised which relate to specific additional costs intended to respond to natural disasters:

Natural disasters


Bushfire response – emergency services $61m

Treating fire affected trees on public land $7m

Regional growth fund – ‘putting locals first’ –  the 2013 alpine fire recovery package $1.75m


The government provided low interest loans for tornado affected businesses, primary producers and organisations (following the March 2013 event in northern Victoria)


$4.3m over 3 years for flood mitigation works


It’s the climate, stupid

Climate science clearly tells us that, without concerted global action to reduce emissions, Victoria will face hotter summers and more extended heatwaves, more erratic rainfall patterns, and longer bushfire seasons.  While we do not suggest that any particular natural disaster is a result of global warming, we do note that the Climate Council says that all extreme weather events are now being influenced by climate change because they are occurring in a climate system that is hotter and moister than it was 50 years ago.

Put simply, climate change is making natural disasters worse. This is impacting on the state budget. By refusing to acknowledge the scale of the problem, the government is driving blind on a key economic issue.

Yet the state government continues with a Business as Usual approach to energy policy. It pins its hopes on the dream of ‘clean coal’ and continues to put public money into research that aims to sustain our use of brown coal for energy production and has blocked off much of the state to wind energy through creating ‘no go’ zones. It has refused to rule out the prospect of new coal mines in the state. It has walked away from meaningful action to reduce our contribution to climate change.

In the last budget, it made the following allocations towards propping up coal production in the Latrobe Valley and further entrenching our reliance on fossil fuels:

  • Clean Coal Victoria – an additional $8.3m
  • Coal mine stability – Latrobe Valley - $4.2m
  • It also allocated funds towards ‘strengthening the earth resources (mining) sector’ $19m. In the introduction to the 2013/14 budget, specific mention is made of brown coal as the state’s largest mineral endowment
  • There was an allocation to a Latrobe Valley transition plan ‘as result of carbon price’ $30m
  • And an allocation towards low emission energy technology through the Energy Technology Innovation Strategy (ETIS) scheme - $41m. This is primarily used for fossil fuel projects
  • Additionally, Energy for the Regions (gas pipeline roll out) received $100m. While this is electorally popular, continuing to invest in the roll out of gas reticulation locks the state into ever increasing energy prices for both domestic and commercial uses.


A vision for the 21st century?

State budgets are how governments fund their political vision. A Business as Usual approach to energy, natural disasters and infrastructure is simply not sufficient to the scale of the problems we are faced with in the 21st century.

In political terms, we believe that a forward thinking government would be acting decisively to reduce our states contribution to global warming. This would need to be enabled by meaningful allocations in the state budget.

In an election year, we are calling for the following:

1/ a permanent ban on any new coal and gas mining operations in key areas in Victoria

2/ we urge all parties to rule out any further coal allocations or development of coal infrastructure

3/ we urge parties to commit to re-write the Baillieu government’s VC82 anti-wind laws and reintroduce a science based approach to siting wind energy

4/ we believe that a commitment to developing a state-based Renewable Energy Target (VRET) would drive regional employment and investment, and help Victoria start to substantially reduce greenhouse gas emissions

5/ we need to get strong, science-based emissions reduction targets back into the Climate Change Act,\

6/ we need to re-start negotiations for the phased shut down of the Hazelwood power station, and replace its capacity with jobs rich renewable energy.


What should be in the budget?

There are some obvious things the government can do to show it is serious about dealing with the reality of climate change:

  • Commit to closure and full rehabilitation of the pit where the fire occurred at the Hazelwood open cut – this will create short term jobs (this will require considerably more than is currently held in the rehabilitation bond already lodged with the government). The government needs to publically announce that it will pursue the company for any shortfall
  • Ensure the other open cut mines are adequately fire proofed (with potential upgrade of sprinkler systems, etc)
  • There must be a rapid assessment of staffing levels for fire fighters, emergency workers and health care professionals in the Latrobe Valley, with a commitment to ensure adequate staffing and funding levels are in place by the end of 2014
  • There must be an assessment of the needs of TAFE and the training sector to be able to train sufficient numbers of workers to deliver the retrofit and new build programs and stronger emphasis on renewable energy we require across our state if we are to have a meaningful response to climate change
  • Government must make an allocation in the May budget for the development of a meaningful energy transition plan for the Latrobe Valley energy sector and to get the Eureka’s Future factory up and running
  • Government to commit to applying remaining Energy Technology Innovation Strategy (ETIS) funds for renewable energy projects in the Latrobe Valley and adjacent areas. The Victorian Government is investing more than $370 million into this program
  • In the short term, the state government must rule out the planned $90 Million in state and federal funds that are being made available for the Advanced Lignite Demonstration Program (ALDP)
  • The government should allocate funds to identify a possible site for a new wind project near the Latrobe Valley (identify possible location, proximity to grid, possible investors, etc). Government should commit to buying the energy from this wind farm through a power purchase agreement
  • The government should establish zero interest loans to support low income home owners in installing solar panels on their roofs
  • The government must support a state wide energy efficiency retrofitting program for existing houses, with a commitment to start roll out in the Latrobe Valley and surrounding communities
  • Commitment to retrofit government owned buildings and facilities in the Latrobe Valley to 8 star standard, with minimum annual targets for conversions, and where feasible, include on-site renewable energy production such as solar panels and collection and use of water on-site
  • The government should lobby to get the Abbott government to use the Federal Government’s Emissions Reduction Fund for renewables, not fossil fuel projects
  • There should be no further financial allocations to gas infrastructure, including the Energy for the Regions program
  • We call for the closure of Clean Coal Victoria and re allocation of its remaining funds to renewable energy projects.