Source : the age
These six graphs break down expected sources of state tax revenue, the budget’s bottom line over the coming years, the scale of Victoria’s debt and where infrastructure investment is heading.
Surplus or deficit
The state government expects to deliver its first surplus since before COVID in the coming financial year, with a $600 million surplus on the cards for 2025-26 followed by larger surpluses forecast for the ensuing three years.
The graph below shows the net result from transactions over the past 20 years, with the section shaded grey showing the estimates of how the state’s bottom line is expected to play out over the coming years.
During the depths of the COVID-19 pandemic, deficits were nudging $15 billion. The last time there was a surplus was 2018-19, when the state’s finances were $1 billion in the black.
Revenue
A surplus simply relies on more money coming in than going out, and the surpluses the state government is estimating over the coming years are being forecast based partly on growing taxation revenue.
Tax revenue is expected to rise from $41.7 billion in 2025-26 to $47.9 billion in 2028-29, driven by growing revenue from land taxes, payroll taxes and stamp duty.
Treasurer Jaclyn Symes said there were no new taxes announced in this year’s budget, but the state government’s coffers are expected to be boosted by about $3.5 billion in 2025-26 by the COVID debt levy introduced three years ago and the mental health and wellbeing levy introduced four years ago. These measures have been highlighted in the graph below, which breaks down state tax revenue:
These levies are expected to bring in a total of $4.1 billion in 2028-29, and without them the budget would not be expected to be in surplus over the next few years.
Debt
Debt has been a shadow hanging over the past few budgets, given how much the state has borrowed to fund infrastructure projects and to deal with the pandemic, and it shows no signs of coming down any time soon.
As of June 30 this year, the state’s debt pile is expected to reach $155.5 billion. The figure is expected to rise to $194 billion by the middle of 2029.
With debt rising, the amount of interest being paid on this debt is expected to increase over the coming years. In 2025-26, the interest bill is expected to be about $7.6 billion (or about 7 per cent of total expenses), rising to $10.6 billion (9 per cent of total expenses) by 2028-29.
This rise in interest payments is expected to be offset by larger increases in tax revenue raked in by a growing economy, in the same way that a home owner who has taken on a sizeable mortgage might assume that the repayments won’t be as painful a few years down the track since they expect to be earning more by then.
Victoria’s fiscal strategy, which was put in place by previous treasurer Tim Pallas, was to bring the budget back into surplus and move on to stabilising debt levels relative to the size of the economy.
The most common way to show how debt weighs on the economy is to express it relative to gross state product (GSP), which is shown in the graph below:
For context, this graph goes further back than the others, all the way to the mid-1980s. As you can see, the state’s debt-to-GSP ratio is currently higher than it was during the recession in the early 1990s. It is expected to peak at 25.2 per cent in 2026-27 before lowering to 24.9 per cent in 2028-29.
Infrastructure investment
There have been a few graphs now that can be best described as a bar or line going up. But to finish off, here is one in which the figures are starting to trend down – state government infrastructure spending.
Infrastructure investment surged in the early part of the decade as the government aimed to energise the economy throughout the pandemic but is set to decline over the coming years.
