York Park Group’s Analysis

The 2024-25 Victorian State Budget was met with surprise at the limited number of cuts to spending or project delays, along with relief that no major new taxes or levies were imposed on business or residents.

The Government is hoping that a growing economy and future interest cuts will provide relief to the State’s mounting debt in the long term.

For the first time in 15 years, the size of the Victorian Government as a share of the economy will shrink. Nevertheless, there’s no doubt that Victoria’s finances are in a perilous position, with growing debt and a Government seemingly unwilling to face up to the scale of the challenge.

Premier Jacinta Allan will be hoping this Budget defines her term, and creates the narrative needed to differentiate her leadership from that of former Premier, Daniel Andrews. However, beyond the support for families doing it tough, and no new taxes for business, it’s difficult to see the ambition or policy agenda being crafted.

Key Take-Outs

The signature announcement was a $400 one-of-payment to an estimated 700,000 students who attend government schools or whose parents are concession card holders. There was also $11 billion allocated for hospital upgrades and expansions, as well as $1 billion to build 16 new schools.

The Airport Rail Link has been delayed by at least four years, and plans to build two new medical towers for the Royal Melbourne and Royal Women’s Hospitals at the Arden Precinct were scrapped along with three community hospitals promised six years ago. It was also announced that 35 mental health and wellbeing clinics would be delayed.

Economic Outlook

The Victorian economy is forecast to grow by 2.5 per cent over 2024-25. The Government says there’s a record 3.7 million Victorians in jobs, with unemployment close to its lowest rate in 50 years as a tight labour market continues to persist, however the State’s unemployment rate is predicted to increase slightly to 4.25 per cent in the next financial year.

Victoria’s net debt will rise to $187.8 billion by mid-2028. Consequently, interest payments in the next financial year are forecast to hit $6.5 billion, representing approximately $27,500 per Victorian. However, net debt as a proportion of the state’s economy is expected to fall for the first time since 2017.

The Reactions

Leader of the Opposition, John Pesutto MP: “With record debt, record interest, record taxes, service cuts and poorer outcomes – it’s clear Labor cannot manage money and Victorians are paying the price.”

Victorian Chamber of Commerce and Industry CEO, Paul Guerra called it a ‘no frills business budget’: “Importantly, we're really pleased, though, that there's no new taxes or levies that are going to be applied to business… And this is the first time in several budgets that that's been the case.” ‍

Royal Australian College of General Practitioners Victoria Chair, Dr Anita Munoz: “This State Budget will worsen the cost-of-living crisis for Victorians and is a huge disappointment to GPs, practice teams and our patients. The Government knows practices can't afford the state's extra payroll tax, and neither can their patients.”

For further detail on the economic outlook, key takeouts and reactions to the 2024-25 Victorian State Budget, please see the full York Park Group analysis paper.