Victoria is set to return to a budget surplus for the first time since before the COVID-19 pandemic, but the figure falls far short of what was anticipated just six months ago. In a budget to be handed down Tuesday, Treasurer Jaclyn Symes will unveil a $600 million operating surplus for the 2025–26 financial year — a figure that, while technically “in the black,” is $1 billion smaller than the forecast from November.
It’s a delicate line for the Andrews government’s successor under Premier Jacinta Allan, as the state attempts to claw its way back from pandemic-era deficits without abandoning politically sensitive investments in cost-of-living relief and infrastructure. The surplus may offer a welcome headline — but the broader fiscal picture remains fraught.
If delivered, the surplus will mark the first time Victoria’s day-to-day government spending is back in positive territory since 2019. But while the operating budget is poised to post modest gains, the state’s overall financial position remains deep in deficit.
Victoria’s net debt is expected to reach $187.3 billion by 2028 — more than double its pre-COVID levels. The government maintains this figure is manageable, arguing that as the economy grows, debt will shrink as a proportion of Gross State Product. Still, credit rating agencies and economists are watching closely, with S&P Global Ratings previously warning that Victoria’s fiscal trajectory could trigger a downgrade if discipline falters.
The Allan government has placed cost-of-living relief at the heart of its budget pitch, most notably through a $318 million initiative offering free public transport for all children under 18, starting from 1 January 2026. The program will cover trains, trams, buses, and regional coaches, potentially saving families up to $755 per child annually.
Premier Allan described the plan as a “real cost-of-living boost for families doing it tough,” positioning it as both a practical solution and a nod to fairness. But not everyone’s convinced. Economists have flagged concerns about affordability amid ongoing fiscal strain.
“You don’t give away hundreds of millions in free services when you’re running deficits and trying to get your house in order,” one economist told The Australian. “It might be popular, but it’s not prudent.”
Alongside social spending, the budget earmarks a hefty $727 million for the state’s justice system — adding 1,000 adult prison beds and 88 youth justice beds. The move follows a dramatic rise in remand numbers, driven largely by changes to Victoria’s bail laws.
Treasurer Symes said the expansion was necessary to maintain community safety. “These investments are about making sure our justice system can respond to demand and keep Victorians safe,” she said.
But critics argue the government is spending too much on incarceration rather than prevention. Advocacy group the Justice Reform Initiative described the plan as “a costly and ineffective response to failed bail laws,” calling for investment in community programs and early intervention instead.
As she delivers her first budget, Treasurer Symes inherits a landscape shaped by a pandemic, soaring infrastructure costs, and a population still grappling with rising living expenses. The modest surplus may help repair the government’s economic credibility — but the deepening debt and ambitious social policies suggest the road to stability remains long.
