Debt Servicing to Hit $25 Million a Day Despite Victoria’s Forecast Surplus

Victoria’s state budget will record the first operating surplus since COVID-19, but net debt remains a burden that Victorians will be paying for years to come.

Labor's Jaclyn Symes, then attorney-general and now-Treasurer, speaks to the media during a press conference in Melbourne, Australia on March 10, 2022. AAP Image/Diego Fedele

Victoria’s Treasurer Jaclyn Symes is spruiking a $600 million forecast operating surplus in 2025/26, the first time the state’s budget has been in the black since the pandemic.

But it’s $1 billion lower than what was predicted in December, and independent economist Saul Eslake has said forecasts of net operating surpluses in the coming financial years should be greeted with a “big yawn.”

“Victoria cannot begin to repay debt, indeed it cannot begin to stop adding to debt, unless it runs cash surpluses,” he told AAP.

“I would be pleasantly astonished ... if she forecasts a cash surplus in any of the four years to which the forward estimates relate.”

Treasurer Symes says she’s pleased that net debt forecasts over the next four years won’t reach $200 billion, after the mid-year budget update estimated it to be $187.3 billion by mid-2028.

But by then, state taxpayers are predicted to be paying $25 million a day in debt servicing costs, leaving less for critical services and infrastructure such as schools, hospitals, and roads.

The more important figure is the cash balance, he said, because it includes infrastructure spending. This has previously forecast deficits of $9.4 billion in 2025/26, $7.7 billion in 2026/27 and $6.8 billion in 2027/28.

Infrastructure Spending Reduced, Health Spending Up

In the last state budget, total infrastructure spending was projected to fall from $23.5 billion a year this financial year to $15.6 billion in 2027/28. Symes confirmed it was still being reduced as major projects such as the Metro and West Gate tunnels, as well as hospitals in Frankston and Footscray, reach completion this year.

“The aggregate (net debt) will be revealed tomorrow, but it won’t start with a two,” Symes said. Net debt as a share of the economy is predicted to peak in 2026/27 and fall in the following years.

Operating net results, which are a measure of day-to-day government sector running costs minus revenue, are expected to be $1.9 billion in 2026/27 and $2.4 billion in 2027/28.

Symes said the government could have posted a larger surplus next financial year, but instead chose to “back Victorians” through policies such as free public transport for children under 18 and statewide free public transport for seniors on weekends.

“We know that cost of living, frontline services, these are the priorities that Victorians expect a Labor government to get behind,” she said.

The government will pledge $11.1 billion injection into the state’s public health service, bringing the total up to $31 billion.

She has promised there will be no new business taxes or increases to existing ones beyond ordinary inflation.

“The message I heard loud and clear from the business sector ... was no more taxes,” she told reporters. The government is rolling out a new “emergency services” levy, however, that has been met with protests by the volunteer firefighter service.

The government is hoping that further savings to the operating budget will come from a review of the public service, with thousands of workers likely to lose their jobs once it’s complete.