Analysis

Labor has handed down the Budget it needs in an election year: a surplus to point to, a cost-of-living package to campaign on, and enough set aside to keep announcing policies through to November. The question is whether voters will look past the present-day relief and ask about the possibility of future pain?

Overview

Easier. Safer. More Affordable. That is how Premier Jacinta Allan and Treasurer Jaclyn Symes are framing this Budget. It is also how Labor will frame its pitch to Victorians at the State Election on 28 November 2026.

A surplus is delivered for the first time in seven years. But the Allan Labor Government continues to spend freely, with $13.8 billion committed to new policies against just $608 million in savings.

Cost of living remained the central theme of Treasurer Symes' second Budget, with free public transport and a 20% rego discount as the headline announcements. These two measures alone cost $433 million and $759 million respectively, contributing to a $2.5 billion cost-of-living package.

The Treasurer repeatedly referenced "Donald Trump's war driving up costs at home", a line that reveals the narrative the Government wants voters to take away: Labor will protect you from the impact of global events.

The clearest winners are commuters and motorists, who benefit most directly from the cost-of-living package. There is also $1 billion to fix roads and potholes, an area Opposition Leader Jess Wilson has made a focus of her attacks.

Families will welcome $761.8 million in school upgrades and $109 million for additional specialist appointments. In the lead-up to the Budget, there was also a pointed emphasis on law and order, with $137.7 million for police resourcing and a $3 million commitment to the first comprehensive review of Victoria's sentencing laws since 1991.

This is a budget designed to win an election with no new taxes on households or businesses. We can expect significant policy announcements to come in the next six months, with $5 billion of ‘contingencies’ that will likely be election handouts to attract votes.

Economic Outlook

The outlook for Victoria is uncertain. The word appears 40 times in Budget Paper No. 2 – Strategy and Outlook alone.

The headline positive is a State Budget back in black for the first time since the pandemic, with a $727 million surplus recorded in 2025-26. The surplus is projected at $1 billion for 2026-27; a significant downgrade from the $1.9 billion forecast just six months ago.

Treasurer Jaclyn Symes framed the result as a point of distinction: “We are delivering the only operating surplus on the east coast – while growing faster than any other state over the decade.”

The Budget forecasts surpluses across the forward estimates: $1.86 billion in 2027-28, $1.94 billion in 2028-29, and $1.97 billion in 2029-30. Despite these surpluses, net debt has risen by $10 billion to $175.6 billion in 2026-27 and will continue climbing, hitting $199.3 billion by 2029-30.

Such significant levels of debt result in significant interest repayments. The cost to service this debt in 2026-27 is $8.9 billion and will rise to $11.8 billion in 2029-30.

The Government is at pains to emphasise that debt as a share of the economy will decline from its peak of 24.9% in 2026-27, falling marginally to 24.4% by 2029-30. That trajectory, however, relies entirely on a growing economy.

A war in the Middle East, rising interest costs and a looming energy shock all cast significant doubt over that assumption. As the Budget Paper itself acknowledges: “given uncertainty about the extent and length of the conflict, the economic impacts remain highly uncertain.”

Gross State Product growth is expected to come in at 1.75% in 2025-26, dip to 1.5% in 2026-27, then recover to 2% in 2027-28 and 2.5% in both 2028-29 and 2029-30.

The unemployment rate is forecast to hold steady at 4.75% from 2025-26 through to 2029-30. Population growth is equally flat, expected to remain at 1.7% over the forward estimates.

Major Announcements

Health

• $249 million to boost maternity services across the western suburbs.
• $130.3 million investment in the Better at Home program to provide hospital-level care in peoples homes.
• $101.9 million to upgrade Triple Zero Victoria’s telephone infrastructure.
• $61.1 million to deliver 4,000 additional planned surgeries 45,000 extra specialist appointments for children.
• $50.7 million of increased funding for Ambulance Victoria.

Education

• $2.2 billion to support students with disability in public schools as part of the Thriving Kids program.
• $761.8 million investment to build, maintain and upgrade schools.
• $500 million to provide 22 kindergartens, five Early Learning Victoria centres and grants for 27 new and expanded kinders.
• $459.4 million investment in Free TAFE places and campus upgrades.

Infrastructure

• $1.04 billion to rebuild, repair and resurface roads, with 70 percent of funding going to regional Victoria.
• $124.5 million to progress activities for the Victorian Renewable Energy Terminal at the Port of Hastings.
• $102.6 million funding for road projects across Victoria.

Transport

• $759 million to provide 20 percent discount on car rego.
• $673.6 million to deliver 25 new X’Trapolis 2.0 trains.
• $433 million to extend free public transport until the end of May and make fares half price until the end of the year.
• $152.7 million jointly funded with the Commonwealth to design, scope and cost electrification of the Melton Rail Line.
• $100 million to expand bus hours, weekend services and new routes.
• $77.5 million to increase frequency of train services across a number of train lines.

Crime and Emergency Services

• $117.5 million to deliver a fast-tracked youth court list in the County Court.
• $100 million for new CFA tankers and pumpers.
• $62 million to recruit up to 200 police reservists and $18.3 million for 3,000 mobile devices for specialist police.

Housing

• $860 million into the Social Housing Growth Fund to help deliver over 7,000 social homes.
• $32.7 million to extend the off-the-plan stamp duty concession.

Reaction

Leader of the Opposition and Shadow Treasurer, Jess Wilson MP

“This budget fails the basic test. It spends big, plans little, and leaves the next generation to pick up the bill.”

"Victoria needs a new approach to managing the books - one that is honest about the challenges we face and clear about how we will turn things around together.”

“Only my Liberal and Nationals team will deliver a responsible long-term economic plan that will stop the waste and chart a clear path to lower debt, lower taxes and to a better future."

Victorian Chamber of Commerce and Industry CEO, Sally Curtain

“Budgets are about choices and business wasn’t chosen today. This budget addresses some cost-of-living pressures, but it does not deal with the root causes that are making life harder for businesses and households.”

“We need a clear plan to get on top of the state’s ever-growing debt, easing the cumulative tax burden, deliver affordable and reliable energy and create the conditions for business investment.”

Property Council of Victoria Executive Director, Cath Evans

“To deliver the state government’s own goal of 80,000 homes a year, Victoria needs the property industry firing on all cylinders. This Budget does not go far enough to achieve that.”

Australian Industry Group, Victorian Head, Tim Piper

"Victoria cannot afford to promise freebies to the electorate without it having consequences. Industry has been repeatedly asked to dig deeper to fund government priorities, and businesses are jack of it. When I meet with businesses in metropolitan and regional areas, the growing level of government costs imposed are at the top of their agenda.”

Victorian Farmers Federation, Acting President, Peter Star

“The Budget has been sold as Victoria’s vision for the future, but is lacking when it comes to detail for regional Victoria.”

Australian Education Union, Victorian Branch President, Justin Mullaly

“The state government has left our schools and TAFEs in the same position as last year: undervalued and underfunded.”

The Urban Development Institute of Australia (UDIA), CEO, Lina Allison

“This budget was about addressing cost of living measures, but the biggest cost of living is housing affordability. This budget leaves home buyers out in the cold. The off the plan concessions are welcome for those lucky enough to be able to afford an apartment in the near term, however unless the structural issues of supply, taxes and red tape are addressed, affordability won't improve.”

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