Govt faces $6 billion budget scare over iffy Port deal

The government and the opposition have reached stalemate during this week's bargaining talks

Govt faces $6 billion budget scare over iffy Port deal
The proposed sale of the port is expected to bring in $6 billion to the treasury.


Weeks of talks between the Victorian government and the Opposition seemed to have reached a deadlock in the matter of finalising an agreement for the sale of the Port of Melbourne, with both sides sticking to its argument.

On Wednesday, Opposition Leader Matthew Guy said an agreement on the matter was "probably further off than it has been for some time".

Guy's statement comes a day after Treasurer Tim Pallas announced that both sides were negotiating the terms of the compensation clause –  the bedrock of the issue – and hoped the legislation would be passed later this month, which in the current situation of a political impasse seems unlikely.

The government’s proposed compensation clause will see the winning bidder receive estimated $2 billion in compensation if a second container terminal is built in Victoria before the Port of Melbourne reaches its capacity – a proposal rejected by the opposition, which says that future government for the next 50 years should not be subject to decision made by the current government

The Coalition says the compensation clause is not in the interest of the state, while the government argues that not adding adequate compensation would undermine the value of the asset leased.

"The coalition has moved quite substantially on a number of fronts, but we don't have anything back from the government except riddles," Guy says.

It is believed that the Coalition has agreed to allow the compensation clause to run for 15 years (the approximate time for the port to reach its capacity), but Labor has proposed an annual cap on the compensation payout equivalent to 20 per cent of the port’s revenue for the full service period (50 years).

The opposition claims that based on the current revenue standard, this payout could be up to $60 million annually.

Arguing in favour of the plan, Pallas says Labor’s compensation proposal is justified and not having it would mean the state will ultimately "lose a considerable amount of the value of this asset when it is brought to market".

"Consequently that will come at a considerable cost to the tax payer," Pallas says.

If the legislation is stalled further it could affect the sale price of the asset, which is a cause for concern for the government that is expecting to make about $6 billion from the transaction.

The proceeds from the sale have been earmarked to support Labor’s promised level crossing removal project.

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