Victoria’s financial landscape is undergoing a significant transformation as it emerges from the shadow of the COVID-19 pandemic. For the first time since the onset of the crisis, the state budget is projected to record an operating surplus of $600 million for the 2025/26 financial year. This milestone, heralded by Treasurer Jaclyn Symes, marks a critical juncture for Victoria, as the state strives to regain fiscal stability. However, the reality is more complex than it appears, with net debt still looming as a formidable challenge.
While the surplus is a positive development, it falls short of the earlier forecast by a staggering $1 billion, raising eyebrows among economists. Independent expert Saul Eslake aptly characterized the anticipated operating surpluses over the next few years as a reason for indifference, suggesting that the financial situation warrants cautious optimism at best. “Victoria cannot begin to repay debt, indeed it cannot begin to stop adding to debt, unless it runs cash surpluses,” he remarked, emphasizing the need for greater fiscal prudence. Eslake’s caution is rooted in the reality that without cash surpluses, which encompass real infrastructure spending, the state’s financial woes will persist.
The projections indicate that while net debt may not reach the alarming $200 billion mark over the next four years, it will still hover around $187.3 billion by mid-2028. This translates into a staggering debt servicing cost of $25 million per day for taxpayers—a number that starkly illustrates the long-term financial implications for Victorians. Such burdens inevitably siphon resources away from essential public services, including education, healthcare, and infrastructure, which are the backbone of community well-being and economic growth.
Compounding the challenges is a concerning trend in infrastructure spending. Last year’s budget projections signaled a reduction in total infrastructure spending from $23.5 billion this financial year to just $15.6 billion by 2027/28. This decrease is attributed to the nearing completion of major projects like the Metro and West Gate tunnels, as well as key hospital developments in Frankston and Footscray. While these projects promise to enhance the state’s infrastructure network, the diminishing budget for new initiatives raises questions about future growth and service delivery.
In terms of operational performance, the government anticipates operating net results of $1.9 billion in 2026/27 and $2.4 billion in 2027/28. These figures, while encouraging, underscore a persistent trend of deficits that could reach up to $9.4 billion in 2025/26 alone. Symes defended the government’s strategic choices, noting that they opted to prioritize direct support for Victorians over a larger surplus. This includes initiatives like free public transport for children under 18 and for seniors on weekends, reflecting a commitment to addressing the pressing cost-of-living crisis.
The government is also making a substantial pledge of $11.1 billion to bolster public health services, raising the total investment to $31 billion. Symes has assured that there will be no new business taxes or increases to existing ones beyond adjustments for inflation, a move intended to foster a more favorable business environment. However, the introduction of an “emergency services” levy has spurred protests from volunteer firefighter services, indicating that not all measures are being received positively.
Looking ahead, the government is banking on further savings from a comprehensive review of the public service, which could result in significant job losses. The outcome of this review will be crucial in determining the state’s ability to navigate its fiscal challenges while maintaining essential services.
In conclusion, while Victoria’s projected operating surplus is a noteworthy achievement, the state continues to grapple with substantial debt and declining infrastructure investment. Policymakers must tread carefully; balancing immediate needs with long-term financial stability will be essential in ensuring a prosperous future for all Victorians. As the state moves forward, transparency, accountability, and a commitment to sustainable growth will be paramount in restoring public confidence and laying the groundwork for a resilient economy.
