The 2024-25 Victoria budget treads a tricky path between reining in debt, promoting economic growth and providing relief on cost-of-living pressures.

It is also navigating the twin shoals of high inflation and labour shortages as it sets a target of turning Victoria’s current $600 billion economy into a $750 billion behemoth by 2028.

The budget reveals a slowing of big infrastructure projects to save money and address a lack of capacity in the economy, particularly in terms of labour and materials availability.

And in the aftermath of the COVID-19 pandemic, significant investments in health, education, transport and housing underpin a reset in the Victorian Government’s economic and fiscal approach.

In announcing the 2024-25 budget, Treasurer Tim Pallas said capacity constraints seen across the world were also affecting how Victoria could respond to economic pressures.

He said the year’s budget was informed by “fiscal discipline” and “sensible decisions”.

“Expenses are growing at 2.2 per cent per year on average in this budget, below average nominal growth at 5.3 per cent – so we’re shrinking the size of government as a share of the economy,” Mr Pallas said.

Services

The budget includes a includes a $400 payment for students at Victorian public schools as part of a $287m package that will see parents free to choose how they spend the payment on education-related expenses like uniforms, school camps and excursions.

There is also an $11 billion injection into the state’s healthcare system will also support the health care and a tripling of a program offering free eye tests and glasses for public school students. This will see the Glasses for Kids program supporting an extra 74,000 prep to grade 3 students.

The budget includes $555 million for the state’s training system designed to upskill more workers to deliver the government’s infrastructure projects.

This includes $31.6 million to deliver the Skills First Skill Set initiative – offering subsidised training for skills needed in industries facing skills shortages; as well as more funding for accredited short courses in sectors such as transport, new energy, disability and construction.

There is $4.4 million for the Digital Jobs Program in the budget to fill critical skill shortages in the tech sector.

Free apprenticeships and traineeships at TAFE will receive $11.4 million in extra funding.

Multicultural Affairs

The budget includes $13.6 million for the Multicultural Affairs portfolio.

This includes $4 million in targeted support for newly arrived migrant and refugee communities, including asylum seekers and temporary visa holders.

There is $17 million in the budget to expand the delivery of the Victorian African Communities Action Plan as well as more than $10 million for community language schools to help people maintain their cultural identity through language.

The budget has also earmarked more than $44 million for the English as an Additional Language program for students requiring support as well as $4 million over two years for anti-discrimination initiatives.

Savings

The budget outlines a smaller government with less office space, less money to spend on advertising, and a shift to deliver more consolidated services.

Government savings and efficiencies announced for 2024-25 are larger than last year’s budget measures, with $297.5 million in total savings compared to $62.3 million in 2023-24.

The budget also winds up COVID-era programs that are no longer needed such as the sick leave guarantee for casual workers.

Numbers

The government is forecasting operating surpluses of $1.5 billion in the 2025-26 and $1.6 billion in 2026-27, an improvement from the 2023-24 budget update.”

The operating surplus is then forecast to increase further to $1.9 billion in 2027-2028.

As a proportion of GSP, net debt is projected to be 24.4 per cent in June 2025 before reaching 25.2 per cent in 2026-27 and then declining to 25.1 per cent in 2027-28.

Strategy

The Victoria Government has been implementing a four-prong fiscal strategy to respond to the economic complexity the state faces.

These are: Investing in workers’ skills to tackle shortages; Supporting families with targeted cost-of-living help; Aligning the workforce capacity with the government’s infrastructure program; and, A strategy to stabilise net debt as a percentage of GSP by improving operating cash flow surpluses while growing the economy.

Labor has now added another fifth prong to its strategy: to drive new growth and reduce net debt to GSP.

According to the state government, this will transform today’s $600 billion economy to nearly three-quarters of a trillion dollars by the end of the forward estimates.

The annual growth rate of net debt to GSP increased across the three years from 2019-20 due to the impact of the pandemic. Net debt to GSP is forecast to reach 25.3 per cent in 2026-27 but fall to 25.1 per cent 2027-28.

Revenue and spending

The budget forecasts total revenue of $96.1 billion. This will rise to average 3.6 per cent annually and reach $106.9 billion in 2027-28.

Total spending is expected to be $98.3 billion in 2024-25 and is expected to grow by an average of $2.2 billion a year over four years reaching $105 billion in 2027-28, the budget papers reveal.

Debt is expected to be $156.2 billion at June 2025 and increase to $187.8 billion by June 2028.

As a proportion of GSP, net debt is projected to be 24.4 per cent at June 2025 before reaching 25.2 per cent in 2026-27 and then declining to 25.1 per cent in 2027-28.

Meanwhile, government infrastructure investment is expected to peak at $24 billion this financial year and the fall, by ten percent each year over the next four years.

Mr Pallas said Victoria’s economy was expected to outpace other states over the next five years and that business investment was also leading the nation.