The Victorian government has failed to meaningfully tackle soaring debt, instead continuing to focus on cost-of-living programs and service delivery with just over 200 days until the state election.
The vast majority of new spending was already announced by the Allan government before today’s budget.
State debt is now projected to hit $199.3 billion in 2029-30, with the state’s interest expense bill to be greater than $11 billion that year.
The budget focuses on both Labor’s traditional strengths — health and education — while addressing community concerns over crime and crumbling roads.
Treasurer Jaclyn Symes described this year’s budget as “disciplined”, spruiking it as the first surplus delivered in seven years.
“You’ll see in the budget that we have continued to fund the frontline services,” Ms Symes said.
“Wanting to make them bigger and expand them more — that’s where we’ve had to lighten off a bit.”
Jaclyn Symes says Victoria is delivering the largest surplus of any Australian jurisdiction. (AAP Image: Joel Carrett)
Ms Symes also took the opportunity to lash other states, saying the surplus was the only one delivered by a state on the east coast, and larger than the surplus delivered in South Australia.
Victoria’s budget has been buoyed by an additional $4 billion in revenue than projected last year, with three-quarters of the boost stemming from grants from a generous federal government.
But RMIT University professor David Hayward said given the extra unexpected revenue, the budget wasn’t nearly as disciplined as portrayed by the government.
“When they get extra cash in they spend it,” he said.
“Got an extra dollar? Give that to me. I’ll spend that on, in this case, health, education, transport and a little bit on community safety.”
Business as usual budget as state election looms
In the Allan government’s final budget before the state election in November, funding will go towards areas the opposition has attacked on the campaign trail.
Who are the winners and losers in Victoria’s budget?
The budget has splashed cash in areas raised consistently as concerns by Victorian voters such as crime, roads and the cost of living.
The government has promised $137.7 million as part of a crime crackdown, including $62 million to recruit more administrative staff for police and $44 million for 50 more protective service officers on public transport.
Nearly $40 million is being spent to target youth crime by establishing a violence reduction unit and a youth mentoring program, while nearly $3 million will be spent on reviewing sentencing laws.
The opposition has also taken aim at the government’s record on roads and potholes in social media stunts.
The government will pour more than $1 billion into road repairs across the state, as well as a further $102.6 million to fund new projects and upgrade existing roads.
Millions will be invested to hire administrative staff to perform clerical work and allow frontline police officers to leave the office. (ABC News: Stephanie Anderson)
Professor Hayward said the spending was to be expected given the state’s current place in its four-year political calendar.
“As we move into an election, you expect to see the money spent,” Professor Hayward said.
“They didn’t want to leave any of the chocolates, just in case there was a change of government.”The depths of the debt
Despite a promised $1.048 billion surplus in the budget, record levels of debt still loom over Victoria’s finances.
Last year, the government projected interest payments on the state’s debt would soar to nearly $29 million a day by the 2028-29 financial year.
Fresh projections released in today’s budget show that figure will continue to balloon.
Interest payments on Victoria’s debt this year amount to $24.4 million a day, growing to $32.3 million a day by 2029-30.
The government projects it will also need to borrow a further $40 billion over the next four years.
But Ms Symes would not answer whether Victoria had paid down any of the principal of its debt, saying the focus was on “stabilising” the debt before paying it down.
To make up for the increased pressure of the debt, the government is betting on its tax revenue growing in the coming years.
Payroll tax, already the state’s biggest money spinner, will jump 15 per cent by 2029-30, as will the projected revenue from land taxes.
But the government’s optimistic outlook is coloured by a decrease in land transfer revenue this year.
It projects it will collect $600 million less in stamp duty in 2026-27, blaming high interest rates and a cooler property market for the dip.
It means government projections that land transfer duty revenue will grow 7.5 per cent a year will be contingent on the property market heating back up.
“We have downgraded our expectations in taxation revenue in relation to the property sector,” Ms Symes said.
The education (and health) state
The Allan government has announced several measures to address cost-of-living pressures, including free public transport across the state for two months and discounted car registration.
The free public transport initiative over April and May will cost Victorians $432.5 million, split over the next two years, while the discount to car registration will cost $756.5 million this year.
The government’s budget paints a rosy picture for the financial climate, despite the latest national figures coming in much hotter.
The Department of Treasury and Finance forecasts the Melbourne consumer price index, which measures inflation, to come in at 3.5 per cent in 2026-27, before dipping to 2.75 per cent the following year.
However, the latest national figures from the Australian Bureau of Statistics show inflation rose 4.6 per cent in the 12 months to March 2026 due to increased fuel costs.
More than $400 million will be spent on providing free public transport across Victoria. (ABC News)
Victoria’s two biggest sectors in terms of government spending remain health and education, making up about 54 per cent of expenses.
A huge investment is being made into disability inclusion in schools, giving every public school in the state access to funding for hiring specialist staff and improving accessibility.
The government has poured $2.2 billion in funding over four years into the reforms, eating up nearly 37 per cent of its total education funding in 2026-27.
More than $222 million will also be invested into rebuilding the troubled Victorian Curriculum and Assessment Authority, after consecutive years of blunders on high school exams.
Education remains one of the largest shares of government expenditure in Victoria. (Pexels: Katerina Holmes)
The government will also invest $1 billion into health in the coming financial year, including nearly $400 million dedicated to patient care.
Ambulance Victoria will receive a $50 million funding boost over the next two years, with the aim of improving the availability of ambulances.
Coalition, Greens slam budget
Liberal leader Jess Wilson said the budget “spends big, plans little, and leaves the next generation to pick up the bill”.
“Victoria needs a new approach to managing the books — one that is honest about the challenges we face and clear about how we will turn things around together,” Ms Wilson said.
Greens leader Ellen Sandell said the budget showed Labor had “no long-term vision”.
“Under-funded schools, healthcare and public services receive very little in this budget, while Labor continues to give handouts and concessions to property developers, gambling corporations and fossil fuels,” she said.
Victorian Chamber of Commerce and Industry chief executive Sally Curtain said it was encouraging the budget did not unveil new taxes but that “holding the line” was not enough.
“Victorians will welcome any relief from cost-of-living pressures, but short-term sugar hits are not enough to secure the long-term prosperity of this state,” she said.
“We need a clear plan to get on top of the state’s ever-growing debt, easing the cumulative tax burden, deliver affordable and reliable energy and create the conditions for business investment.”