Labor unveils election-year hip-pocket splurge despite debt soaring to $199 billion
Updated ,first published
Finance Minister Jaclyn Symes has handed out an election-year budget aimed at the deep pockets of Victorian voters, moving away from the big-spending Big Build even as the state’s net debt has risen to almost $200 billion.
Despite some savings efforts and plans to reduce money for new projects, the bill for interest repayments on the state’s debt pile will rise to $11.8 billion by the end of this decade from $6.8 billion in 2026-27, with net debt reaching a record $199.3 billion.
This will be largely driven by refinancing existing loans and the additional debt Victoria will take on over the next four years to continue paying for infrastructure projects such as the Suburban Rail Loop.
Ahead of November’s state election, Symes sought to make cost of living a central focus of his second budget, which raised around $759 million for a 20 percent discount on car registrations and $433 million to expand free public transport. until the end of May and we will implement half-price fares for the remainder of 2026.
There are also billions of dollars earmarked for undistributed “decisions made but not announced,” which could include election announcements to be released later this year.
The new spending totals $13.8 billion over the next four years, dwarfing just $607 million in new savings measures described in budget papers as public service efficiencies, including the centralization of government IT services.
The budget also includes funding for Thriving Kids, a replacement program for autistic NDIS recipients, and an increase to state teacher salaries, which is still subject to negotiations.
Symes said the government would always focus on the cost of living, given public feedback that households were falling behind amid stubborn inflation.
But he said the oil price shock caused by the war in the Middle East had pushed the price of gasoline well above $2 per litre, reinforcing transport discounts as the best way to achieve this.
“We didn’t predict petrol prices, so we responded later in the post on what the biggest impact was for Victoria.
“You can’t go to a barbecue without talking about how much it costs to fill up with gas.
“We know it’s harder to make decisions about what to do and where to go.”
The budget includes cost-of-living measures totaling $2.5 billion, including transportation concessions as well as $120 million for school uniforms, eyeglasses and breakfast programs.
This figure includes an $860 million commitment to add 7,000 social homes over the next decade.
Another $3.9 billion would go to health, $1.6 billion to help services keep up with demand, and an additional $1.6 billion would go to new schools, improvements and maintenance. Approximately $2.2 billion will be funded to support children with disabilities in schools.
In other states, allowances for long-behind foster, relative and permanent caregivers will be increased. The lowest support level will be an extra $400 per year, while the highest support will increase the caregiver’s annual income by $1700.
But the budget also contains dire economic warnings for a government whose fiscal strategy has been to expand the economy to the point where its debt represents a small fraction of gross state product.
Victoria’s economy is forecast to grow by 1.5 per cent in 2026-27; This is almost half the 2.75 percent estimate in last year’s budget and 0.25 percentage points below what would be expected based on forward-looking forecasts.
Although net debt will rise to $199 billion, this growth will be enough for the government to claim that debt as a percentage of the economy is gradually easing. Net debt to GSP will reach 24.9 per cent in 2026-27 and fall to 24.4 per cent by 2030.
Symes defended the state’s finances by comparing the state debt to the overall budget size.
“The cost of the budget is about $115 billion every year… The debt is about $200 billion, which is less than half of our income at the end of futures trading,” he said.
“So from a household perspective, if your mortgage debt is less than half your annual salary, you’re generally in good shape.”
Since last year’s budget, the government has secured an extra $5 billion in revenue for 2025-26.
However, Victoria showed only a modest increase in operating surplus to $727 million compared to $710 million in December. Symes defended the decision not to transfer this windfall towards retirement debts.
“What you want to do is identify where you’re going to take $5 billion out of government spending,” he said. “We made choices to spend 58 percent of that on health and education, for example.”
Victoria’s operating surplus does not include capital expenditure, which can be financed by loans and adds to net debt, such as roads and hospitals. When this is taken into account, Victoria will spend $10 billion more than it receives in 2026-27, with the annual deficit remaining at over $7 billion on forward-looking estimates.
Government spending will rise from $114.5 billion next fiscal year to $123 billion by 2030.
Start your day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.
