Here are seven charts to make sense of the Victorian state budget

The Victorian government has handed down its budget, with debt predicted to grow. (Flickr: williamnyk)

The Victorian government handed down its budget for 2024-25 yesterday.

Some of the big announcements include $400 credits for children at government schools, the delay of the Airport Rail Link, and billions of dollars invested into upgrading major hospitals — but plenty more can be gleaned from the data.

Here are seven charts to help make sense of the numbers.

Debt is predicted to grow

The Victorian government is in debt, and that’s only predicted to increase.

After a sharp rise in the last few years, attributed to the COVID pandemic and big infrastructure project spending, the debt is expected to grow to $156.2 billion.

By 2027-28, it’s forecast to rise further, to $187.8 billion.

However, the debt isn’t growing as fast as it has in previous years, which is perhaps better seen by comparing the size of the debt to Victoria’s economy as a whole.

The size of Victoria’s economy is measured using the Gross State Product (GSP), which is calculated by adding up all the goods and services a state produces.

When analysing these figures together, we can see Victoria’s debt will reach 24.4 per cent of its economy in the next financial year.

In budget forecasting, it’s expected to peak at 25.2 per cent in 2026-27 — then fall by 0.1 per cent the year after.

In his budget speech, Treasurer Tim Pallas said this predicted decrease would be the first since the pandemic, and would indicate the “strength” in the growth of Victoria’s economy.

But it’s only a forecast figure at this stage.

Goal to reach budget surplus by June 2026

The Victorian government not only predicts a reduction in the debt ratio — it’s forecasting a budget surplus.

This means the government will be taking in more money than it’s spending.

After years of being in deficit through the COVID response years, the government predicts there will be one more year of deficit before a surplus of $1.5 billion in 2025-26.

The budget surplus is predicted to grow from there, increasing to $1.64 billion in 2026-27, and $1.94 billion the year after that.

Infrastructure spending predicted to drop

One way the government has tried to keep future budgets in surplus is by reducing its spending on capital projects.

These projects encompass all the building and repairing of infrastructure that happens across the state, from major road projects, to new schools, and hospital upgrades.

There was a massive increase in infrastructure spending in the past few years, including level crossing removal projects across Melbourne, the West Gate Tunnel, the Metro Tunnel, and early works on the Suburban Rail Loop.

But now the government is looking to curb this.

The budget predicts annual infrastructure spending will reach a peak of $23.3 billion in the coming financial year, and gradually decrease to $15.6 billion in 2027-28.

Pallas says this is intentional, as the aim is to decrease the amount spent on infrastructure to pre-COVID levels, “to better align with the ability of our economy to deliver”.

Health and education dominates spending

To get an idea as to what the state government spends its money on, a breakdown of expenditure by government function is a useful measure.

These functions are defined by the Australian government, and are useful when comparing the expenditure of different states and territories.

Health spending dominates, comprising 31 per cent of the 2024-25 budget’s operating expenses.

Next comes education, which equates to about a quarter of spending.

That’s followed by public order and safety, which includes policing, general public services, encompassing public servant wages, and transport.

These proportions stay similar from year to year.

Big reductions across government functions

Grouping government spending into these functions can also show where the government might look to save money in coming years.

This can be done by taking the amount allocated for the coming financial year, and comparing it with the forecast allocation for 2027-28.

For example, ‘general public services’ will see a $3 billion annual increase in spending between this budget and 2027-28.

This allocation includes all the costs of running a government, such as paying MPs and public servants.

The biggest decrease is in ‘economic affairs’, which includes agriculture, forestry, mining, manufacturing, construction and communication. There will be more than a 50 per cent reduction in spending in this sector between this budget and 2027-28.

The next biggest reductions are in ‘recreation, culture and religion’, which includes sports funding, which the state government predicts will halve over the next four years.

But the biggest increase is in a classification called ‘not allocated by function’. As its name suggests, this money has not yet been set aside for a particular purpose.

Payroll taxes are the state’s biggest

And finally, a look at how the government makes its money from taxes.

The biggest tax is payroll tax, which is calculated based on wages paid to employees by an employer above a threshold.

Revenue from this tax is expected to grow, and is bolstered by the COVID Debt Levy, and the Mental Health and Wellbeing Levy, with these levies paid by businesses with a national payroll of more than $10 million.

Revenue from stamp duty and land taxes is also predicted to increase, while revenue from gambling taxes is expected to fall.