Victoria’s Digital Future: A $500 Million Cable and a Tax Tightrope
Australia’s digital backbone is getting a major upgrade, but a new report suggests the state poised to benefit most from that upgrade – Victoria – is simultaneously erecting barriers to the very investment it needs to thrive. The announcement of a $500 million subsea fibre optic cable project, lauded by tech entrepreneur Bevan Slattery as receiving “outstanding” support from the Victorian government, is juxtaposed with findings that the state is the least attractive in Australia for businesses due to its complex regulatory environment and high tax burden.
The Cable: Powering Australia’s Data Demands
SUBCO’s ambitious project will lay over 5000 kilometers of fibre optic infrastructure, connecting Sydney, Melbourne, Adelaide, and Perth. This isn’t just about faster Netflix streaming; it’s about enabling the data transfer capacity – a staggering 400 terabits per second – required to support burgeoning data centres, cloud computing, and the increasingly data-intensive demands of modern industries. The cable will also provide crucial links to international markets like the United States, Singapore, and India, solidifying Australia’s position in the global digital economy. This infrastructure is vital, and Victoria’s role as a key landing point is strategically significant.
A Two-Speed Economy? Tax and Regulatory Headwinds
However, the Business Council of Australia’s recent report paints a concerning picture. While Victoria performs adequately in planning approvals, its tax regime is a significant deterrent. The state levies the third-highest land tax for domestic owners and the highest for foreign owners, alongside the nation’s highest commercial stamp duty. These aren’t minor differences; the introduction of COVID-related land tax surcharges and increased absentee owner levies in 2024 further exacerbate the issue. This creates a significant disincentive for investment, particularly in capital-intensive projects like data centres that the new cable is designed to support.
Licensing Labyrinth: A Regulatory Burden
The problems don’t stop at taxation. Victoria also ranks last in business licensing, requiring a significantly higher number of licenses, regulations, and codes of practice compared to other states. For example, operating a cafe in Victoria requires roughly two-thirds more regulatory compliance than in the Northern Territory, and retail businesses face nearly double the obligations compared to Queensland. This administrative burden disproportionately impacts small and medium-sized enterprises (SMEs), stifling innovation and growth. The sheer complexity adds costs and delays, diverting resources from core business activities.
The Economic Impact: A National Drag
Given that Victoria generates nearly a quarter of Australia’s GDP, its economic performance has a substantial ripple effect across the nation. The Business Council warns that Victoria’s weak business environment negatively impacts Australia’s global competitiveness. Bran Black, the Council’s CEO, argues that the current approach “drags down businesses and drives investment from the state.” The message is clear: a thriving Victorian economy is crucial for national prosperity, and the current trajectory is concerning.
Allan’s Defence: A Revenue Perspective
Victorian Premier Jacinta Allan defends the state’s tax policies, pointing out that Victoria collects less revenue per person than Western Australia. However, this argument doesn’t address the fundamental issue of competitiveness. A lower tax burden, even with slightly lower revenue, can attract more investment, ultimately leading to a larger economic pie and increased overall revenue. The focus needs to shift from simply maximizing revenue to fostering an environment where businesses can flourish.
Future Trends: The Rise of Digital Sovereignty and Regional Data Hubs
Looking ahead, the tension between infrastructure investment and regulatory burdens in Victoria highlights a broader trend: the growing importance of digital sovereignty. As geopolitical tensions rise and data security concerns escalate, countries are increasingly focused on controlling their own data and building resilient digital infrastructure. Australia, and Victoria specifically, has the potential to become a regional data hub, attracting investment in data centres and related services. However, realizing this potential requires a policy environment that is conducive to investment and innovation. We can expect to see increased competition between states and territories to attract data centre investment, with tax incentives and streamlined regulations becoming key differentiators.
Furthermore, the demand for data transfer capacity will only continue to grow, driven by the proliferation of IoT devices, the expansion of artificial intelligence, and the increasing reliance on cloud-based services. This will necessitate further investment in subsea cables and related infrastructure. Victoria’s strategic location and the SUBCO project position it well to capitalize on this trend, but only if it addresses its regulatory and tax challenges.
What steps will Victoria take to balance its revenue needs with the imperative of attracting investment and fostering a thriving digital economy? Share your thoughts in the comments below!
