Victoria's budget forecasts record debt levels with public service jobs on chopping block

Australia Broadcast Center

20-05-2025

Victoria's debt is set to balloon to record levels as the state government battles to rein in spending, even as the axe looms over thousands of public sector jobs.
Treasurer Jaclyn Symes's first state budget reveals net debt will reach $167.6 billion this year, before growing to an eye-watering $194 billion in three years' time.
It will see the state pay $7.6 billion in interest in 2025-26 — or $20.7 million a day. Those repayments will jump to $10.6 billion annually or $28.9 million a day in three years' time.
The budget includes a $600 million surplus, helped along by the controversial Emergency Services and Volunteers Fund, which will tip $1.6 billion into government coffers in the coming financial year.
Under pressure to rein in spending, the treasurer has promised to save $3.3 billion over the forward estimates by "stripping back inefficiency" in the public service sector.
The government has provided little detail on how this will be done or the "several thousand" jobs that will be axed, instead waiting for a review from top bureaucrat Helen Silver due in June.
"What I found compelling in Helen's additional work is that Victoria had 500 entities and 3,400 public boards," Ms Symes said.
"You can't tell me there's not some fat in that."
Ms Symes today confirmed about 1,200 full-time equivalent job losses had been "built in" to the multi-billion-dollar savings, including some through natural attrition, as workers moved around or left the public service and weren't replaced.
But she also acknowledged more job losses would come.
"We have flagged up to around 3,000 but I will have more to say after [Ms Silver's] final report," the treasurer said.
"The reason is not a lack of transparency, the reason is because this will impact individuals and we need to go through the proper processes."
The budget papers show net debt as a proportion of Gross State Product — a figure representing the size of the state's economy — will be 25.1 per cent in 2025-26 before peaking at 25.2 per cent the following year.
This will remain virtually unchanged across the forward estimates, despite the government promising to tackle the debt crisis.
"Reducing net debt as a proportion of Gross State Production is a measure we're focused on," Ms Symes said.
"I'm looking forward to committing to that — it is my public commitment. I will make sure we're on track with that."
Contributing to the debt are cost blow-outs to the state's major projects, now totalling $3.3 billion.
This includes an already-declared $827 million blowout to the Metro Tunnel project.
Analysis of 518 budget-funded projects showed a 1.9 per cent increase in costs since the 2024-2025 state budget, while 128 major projects (projects with a total expected investment above $100 million) showed a 2 per cent increase in costs.
Project delays were attributed to supply chain issues constraining labour, equipment and materials.
Despite the uncertainty around the looming service cuts, Ms Symes's budget has thrown more money at key sectors including health and crime prevention.
The budget allocated $11.1 billion to Victoria's health system, including$634 million to open nine new or redeveloped hospitals such as Footscray Hospital and Frankston Hospital.
$497 million will also go towards improving mental health services, while $167 million was committed towards reducing ambulance wait times.
RMIT University professor David Hayward has labelled it "another generous budget" at a time when the government was expected to be "more prudent".
"The operating surplus is wafer-thin, and there's a surprisingly large amount of new initiatives right across the board — and many of them are quite small," Dr Hayward said.
"The big, big chunk is in health, and the question is how can they change their minds when last year we were told the health services were inefficient and they need to get their act together."
The government has set aside $1.6 billion to prevent crime, including $727 million to implement the state's new bail reforms and $176 million to reduce repeat offending by expanding rehabilitation and support services.
$92 million will also go towards police recruitment and community safety organisations like Crime Stoppers and Neighbourhood Watch.
The money flowing into government coffers through taxes will continue to rise to $41.7 billion in the coming financial year.
Payroll tax and stamp duty are the largest contributors, although the Emergency Services and Volunteers Fund (ESVF) will tip in $1.6 billion — up from $1 billion after being supercharged by the government.
The tax will be charged alongside council rates, and replaces the cheaper fire services property levy, raising funds for fire services, the State Emergency Service, triple-0 and the state control centre.
All landholders in Victoria will pay more for the ESVF, but farmers in particular are facing increases of tens of thousands of dollars.
This morning, thousands of farmers and CFA volunteers protested the levy on the steps of Victorian parliament.
They said the government's new tax was "totally unfair" and would send communities to the wall.
About $6.4 billion will be raised through land tax, while vehicle registration fees will also contribute $2.4 billion in the next financial year. Taxes on electronic gaming machines will also raise more than $1.4 billion.
Victoria's population growth is also projected to slow down and stabilise.
In the 2023-24 financial year, the population grew 2.4 per cent, but is now forecast to grow 1.7 per cent a year for the next four years.