Victoria recorded a $727m operating surplus for 2025-26, its first since the pandemic, the state budget handed down on Tuesday shows. Treasurer Jaclyn Symes said the result made Victoria the only eastern seaboard government in surplus that year, and projected further small surpluses through to 2029-30 even as debt rises. When capital spending is included the budget returns to deep cash deficits, and debt is forecast to hit about $199.3bn by 2029-30. The figures leave the state with tighter fiscal headroom despite the headline surplus.

Victoria posted a $727m operating surplus for 2025-26. That beat the pre-budget update of $710m published in December and improves on the $611m forecast made last May. Jaclyn Symes, the treasurer, called it the state's first surplus in seven years.

"We join Western Australia and South Australia as the only jurisdictions in surplus," Symes told reporters. "But of course, South Australia's is smaller than ours, and Western Australia can rely on things that other states can only dream of for royalties and the sweetheart GST deal."

Numbers behind the headlines

The budget projects a $1.05bn operating surplus in 2026-27, before larger surpluses of $1.86bn in 2027-28, $1.94bn in 2028-29 and $1.97bn in 2029-30. The 2026-27 surplus is about $895m lower than the December forecast.

Those operating surpluses exclude capital and infrastructure spending. When those items are included, Victoria is forecast to post a cash deficit of $7.7bn in 2026-27.

The shortfall narrows to $7.12bn in 2027-28, then widens to $7.58bn in 2028-29 and $8.07bn in 2029-30.

Mastheads

State debt is set to climb from $165.3bn at June 2026 to $199.3bn in 2029-30. The budget papers say that debt will stabilise relative to the economy at about 24.4% of gross state product by 2029-30. Interest payments on that debt are forecast to reach $11.82bn in the same year, which the documents note is equivalent to about $32m a day.

Where the money comes from and where it goes

Tax revenue will probably be $41.52bn this year and to rise to $43.18bn in 2026-27. The budget assumes tax receipts will grow by an average 5.1% over the forward estimates. Stamp duty revenue is forecast to fall in the coming financial year due to weaker property market activity amid higher interest rates, before recovering in 2027-28.

The public sector wage bill is another major cost. It's budgeted at $41.13bn in 2026-27, or roughly 35% of total revenue. The government confirmed in December plans to cut 1,000 public sector jobs, including about 300 executive roles, and to merge several entities to reduce costs.

Gambling revenues also change under the budget. The introduction of mandatory carded play will probably reduce poker machine receipts. That decline is partly offset by forecast growth in lottery revenue after the state agreed a new deal with the Lottery Corporation. The operator told investors it had been granted a 40-year extension to its Victorian licence, allowing it to operate until 2068.

The budget rests on several assumptions. One is that Victoria's economy will continue to grow, the papers say, by about 1.5% in 2026. Another is that higher interest rates will dampen property turnover and some consumption, affecting receipts from stamp duties and gambling.

Policy choices are visible in the numbers. The government is seeking to show fiscal repair through operating surpluses.

It's also pressing ahead with capital investment and recurring spending that push the cash position into deficit. Debt, meanwhile, is being managed as a share of the economy rather than as an absolute ceiling.

But the gap between operating surpluses and cash deficits matters. The operating surplus signals that day-to-day revenue exceeds day-to-day spending. Yet the cash deficits show the state is still borrowing to fund infrastructure and other capital commitments. That borrowing lifts interest costs and reduces flexibility.

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Interest payments on state debt are forecast to total $11.82bn in 2029-30.

This article was created with AI assistance.