Victoria's 2026-27 budget: surplus, cost-of-living relief, and rising debt

Lead

The Victorian government has handed down its final budget before the November state election, projecting a $1 billion operating surplus for 2026-27 while unveiling a mix of cost-of-living relief and new spending on health, education, and law and order. The surplus, which follows a $700 million operating surplus in 2025-26 – the first since before the pandemic – comes as the state's debt continues to climb, drawing criticism from opposition leaders and fiscal experts.

Treasurer Jaclyn Symes characterised the budget as "disciplined," noting it was the only surplus delivered by a state on the east coast and larger than South Australia's. The government says the surplus allows for continued investment in frontline services while offering targeted relief to households facing cost-of-living pressures.

Coverage comparison

Reporting on the budget varies in emphasis, with some outlets focusing on the government's cost-of-living measures, others on fiscal sustainability, and still others on the political implications of the spending.

The ABC's coverage highlighted both the surplus and the underlying debt trajectory. One ABC report noted that the government's Strategy and Outlook document released with the budget did not include debt reduction as a topic, while another pointed to state debt growing from $203 billion to $243.4 billion by 2030, with interest payments rising to $11.8 billion annually. The Guardian's coverage emphasised the distinction between the operating surplus and the cash deficit, quoting opposition leader Jess Wilson's criticism of the "debt bomb" and questioning whether the surplus was "real."

Other ABC reports focused on the winners and losers of the budget, categorising motorists and public transport users among the winners, while small businesses were identified as losers with no major relief. A separate report concentrated on the law and order package, including a $3 million review of the Sentencing Act.

David Hayward, a public policy professor at RMIT University, was quoted in multiple ABC reports criticising the government for spending windfall revenue rather than reducing debt faster. Hayward said of the government: "They didn't want to leave any of the chocolates, just in case there was a change of government."

Key claims

The budget projects a $1 billion operating surplus for 2026-27, down $943 million from December's forecast. The government also reported a $700 million operating surplus for 2025-26, the first since 2018-19. However, the operating surplus does not include infrastructure and other capital spending. The cash deficit for 2025-26 was estimated at $9.68 billion, decreasing to $6.8 billion in 2027-28 before widening to $8.1 billion in 2028-29.

Net debt is expected to be $165.8 billion at June 2026, rising to $192.6 billion by 2028-29 and stabilising at about 25% of the economy. One ABC report projected state debt to hit $199.3 billion by 2029-30, with interest expense exceeding $11 billion annually. Another report estimated total borrowings growing about 20% from $203 billion to $243.4 billion by 2030.

The government's revenue forecasts include payroll tax growth of 4.9% annually (reaching 15% by 2029-30), land tax growth of 5% annually, and stamp duty revenue projected to grow 7.4% annually, contingent on property market recovery. However, stamp duty revenue is forecast to drop by nearly $600 million this year due to high interest rates and a cooler property market.

Cost-of-living measures include a 20% car registration rebate, available from June 1 to July 31, with eligible drivers receiving $186 back on the average $930.70 annual registration. The scheme, which allows claims for up to two cars per person, is expected to cost the government about $750 million in foregone revenue. Public transport will remain free until the end of May, then be half-price for the rest of the year. Premier Jacinta Allan cited the war in Iran/Middle East as driving fuel prices and cost-of-living pressures.

Health spending remains the largest expenditure, with nearly $4 billion allocated. This includes $1.6 billion for hospital staff, medicines and resources, $284 million for hospitals and wards, $145 million for infrastructure, and $299 million for maternity and IVF. Specific investments include $95 million for Werribee Mercy ED, $87.2 million for community hospitals, $50.1 million for children's surgeries, and $43.4 million for a fertility program.

Education funding includes $2.2 billion for a disability inclusion program in schools, representing 37% of total education funding in 2026-27. Almost $500 million will expand Free Kinder, delivering 22 kindergartens and five early learning centres. $1.6 billion will go to new schools, upgrades, and maintenance, with $222.2 million for rebuilding the Victorian Curriculum and Assessment Authority after exam blunders.

Law and order investments total $137.7 million, including $62 million for 200 police reservists, $18.3 million for 3,000 mobile devices, and $44 million for 50 additional protective services officers. The package also includes $40 million for youth crime programs and funding to triple Tobacco Licensing Victoria inspectors. A $3 million review of the Sentencing Act, last reviewed in 1991, will examine community expectations, victim support, and good Samaritan laws, following the stabbing death of a man at Mernda train station.

Perspectives

Government: Premier Jacinta Allan and Treasurer Jaclyn Symes defend the budget as delivering a surplus while providing cost-of-living relief and investing in frontline services. Allan said reducing debt "hard and fast" would hurt households, while Symes highlighted the surplus as a sign of discipline.

Opposition: Opposition leader Jess Wilson criticised the budget, calling the surplus not "real" because it excludes infrastructure spending, and described the state's debt as a "debt bomb." The opposition has promised tougher sentencing and bail laws should it win the election.

Expert: David Hayward, a public policy professor at RMIT University, argued the government was not as disciplined as portrayed, spending unexpected revenue rather than reducing debt. He noted the Albanese government had been "much more generous" to Victoria than the Morrison government, and that Victoria had "just spent it."