Delays, cuts and broken election promises: How the state budget unfolded

Families of school children will benefit most from the Victorian State Budget.

Analysis: Jacinta Allan’s first state budget was never going to be pretty.

Victorians have watched the state’s net debt balloon to record highs for years for years and Labor’s go-to solution – under Daniel Andrews – has been new and increased taxes.

On Tuesday, the new Premier’s debut budget bucked that trend.

Jacinta Allan and Tim Pallas finally did what commentators, experts, business leaders and other politicians have been desperate for the government to do.

They admitted Victoria is in a tough spot and – when faced with interest rate rises and crippling staff shortages – something had to give.

Labor will not complete its roll out of free, four year old kinder by 2032.

Labor will not complete its roll out of mental health facilities by 2032.

And Labor will not build a flagship hospital above Metro Tunnel’s new Arden train station.

That project was touted as the “biggest” hospital project in Australia’s history when Daniel Andrews announced it ahead of the 2022 state election but according to the government today, electromagnetic interference from the train system below would have adversely affected equipment inside the hospital above.

What was billed as a “medical precinct” at Arden will instead become a haven for housing.

The Royal Melbourne Hospital and the Royal Women’s will still be redeveloped as part of the project and Tim Pallas insists the government can squeeze the services that would have been built at Arden on top of the existing hospitals, despite the fact that its land – which backs onto a school – is fully developed.

The Treasurer also confirmed that three of the 10 community hospitals Labor promised in 2018 will likely not be built. Facilities at Emerald Hill, Eltham and Torquay haven’t progressed beyond the planning stage but Health Minister Mary-Anne Thomas dodged the question when asked whether they could be scrapped last month.

Tuesday’s budget also cut funding for tourism and major events. Just $184m million has been allocated to the department in 2024-25, down from $469 million the previous year.

The state government is also looking to save $1.78 billion over five years by ending Daniel Andrews’ sick pay guarantee for casual workers, cutting down on advertising, reducing the office footprint of the public service, consolidating pharmacies and spreading Breakthrough Victoria’s $2 billion investment over 15 years instead of 10.

Those cuts particularly to the sick pay guarantee – may frustrate Labor voters as well as Trades Hall but contrary to recent years, business leaders left the budget lock-up with a smile on their face.

After bearing the brunt of the Mental Health Levy and COVID Debt Levy in recent years, not to mention hikes in WorkCover premiums, the tax burden shouldered by businesses was left alone on Tuesday.

Taxes more broadly will increase. With increases to the fire services and waste management levies, on top of predicted 6 per cent increases in land tax and stamp duty, Victoria’s tax take will increase to $45.08 billion in 2027-28.

Victoria will collect $36.92 billion in tax revenue this financial year, which is more than double the $18.07 billion collected during 2014-15; the Andrews government’s first year in power.

And yet, despite a steep drop in the state’s infrastructure spend over the forward estimates, the above cuts and an increase in tax revenue, Victoria’s net debt continues to climb.

Come 2027-28, state debt will exceed $187 billion.

When Labor came to power in 2014, Victoria owed just $23 billion.

On Tuesday, Tim Pallas praised his own forecasts which heralded a drop in the state’s ratio of net debt to GSP (Gross State Product) from 25.2 pr cent in 2026-27 to 25.1 per cent in 2027-28.

Not only are estimates like these woefully inaccurate, they’re based on flattering population, growth and tax estimates. And, if you check last year’s budget update, you’ll notice that the ratio predicted for 2026-27 was supposed to be 25.1 per cent in the first place!

Talking up that decline is the budget equivalent of putting lipstick on a pig.

What’s more encouraging is the restraint Jacinta Allan has shown in new spending.

Yes, the government carved out a $400 credit for every one of the 700,000 students attending government schools, but it’s a modest – and generally targeted – sweetener for parents struggling with the cost of living.

There’s also billions of dollars for school and hospital upgrades but most were already in train or promised at the last election.

Locking in funding for hospitals worth $8.8 billion over five years should also give greater certainty and clarity to boards who have been told to rein in costs over time; although some regional MPs are quietly fuming that their local hospital isn’t in line for a major cash boost.

In exchange, Jacinta Allan and Tim Pallas have locked in three years of budget surpluses beyond 2025. Both know that these narrow margins are far from guaranteed and another blow out on a major project (like the Suburban Rail Loop) could compromise it all.

But in the words of the Treasurer, “it’s time for the Government to recalibrate.”

Tuesday’s budget may not have debt in check but it’s a step in a new direction, under a new Premier with a new mantra.

“Sensible and disciplined.”