THE State Government is talking up Victoria’s economic strength following the release of its latest budget update release last Friday, highlighting modest improvements in the bottom line, strong jobs growth and record business investment. But economists caution that the broader fiscal picture remains far more complex than the government suggests.
Treasurer Jaclyn Symes said the update confirms Victoria is “on track” to meet its five-step fiscal strategy, with an operating surplus of $0.7 billion forecast for 2025–26, about $100 million better than predicted in May. The state has also recorded three consecutive operating cash surpluses, including $3.2 billion in 2024–25 and a projected $6.1 billion by 2028–29.
Net debt is expected to fall to 24.9 per cent of Gross State Product over the forward estimates, with total debt now forecast to be $1.4 billion lower than previously projected.
According to Ms Symes, these figures demonstrate that the government’s fiscal repair plan is working.
However, the Budget Update has been overshadowed by the fallout from the Silver Review, which will cut around 1000 public sector jobs.
Ms Symes maintains the reduction will not affect frontline services, arguing the review targets duplication and inefficiency. But economists warn the job losses sit awkwardly alongside the government’s narrative of strong employment growth, and may raise questions about the sustainability of current labour-market strength.
The tension between the government’s upbeat messaging and the job cuts reflects the deeper structural pressures still shaping Victoria’s finances. While the state is forecasting a return to surplus, analysts note that large-scale capital projects, including the Metro Tunnel and the West Gate Tunnel, continue to place significant strain on the overall budget position. Debt remains high by historical standards and will require ongoing economic momentum to stabilise.
Despite those concerns, the government can point to several robust economic indicators. Business investment has grown faster in Victoria than in any other state over the past three years, with national accounts data showing a 3.6 per cent jump in the September quarter, the strongest rise in more than two years.
The labour market remains one of the state’s most reliable strengths: Victoria has added more than 300,000 jobs over three years, and employment is forecast to grow by 1.25 per cent this year. Unemployment sits at 4.7 per cent, below long-term averages, with participation near record highs.
The update also includes changes to the Emergency Services and Volunteers Fund, freezing the variable rate for primary production land and delaying adjustments affecting investment properties by 12 months.
While Premier Jacinta Allan and Treasurer Symes insist the update confirms a “strong, resilient” economy, analysts say the true test will come as Victoria works to reduce debt after a decade of major infrastructure spending and pandemic-era borrowing.