Victoria state budget 2026: state back in black forecasting two back-to-back surpluses

Victoria is back in black for the first time since the start of the pandemic, with Tuesday’s state budget to deliver an operating surplus and forecasting another next financial year.

The 2026-27 budget, to be handed down on Tuesday afternoon, will show the state recorded a $700m surplusin 2025-26, largely in line with December’s pre-budget update of $710m and an improvement on the $611m forecast last May.

It marks Victoria’s first surplus since before the Covid-19 pandemic in 2018-19, when the state’s finances were $1bn in the black.

The treasurer, Jaclyn Symes, has also projected a $1bn surplus in 2026-27, down by $943m on December’s forecast.

The government has said the budget – its final before the November state election – would show average surpluses of $1.7bn projected across the forward estimates period.

“Labor’s budget is in surplus while continuing to invest in the frontline services Victorians rely on,” Symes said in a statement.

“Jess Wilson’s Liberals will do what they always do – they will cut funding, close hospitals and sack workers.”

However, like other states, Victoria’s headline operating surplus does not include infrastructure and other capital spending. The government did not release the figures that include this spending before Tuesday’s budget, but the December update had estimated a cash deficit of $9.68bn in 2025-26, decreasing to $7.3bn in 2026-27 and $6.8bn in 2027-28 before widening again to $8.1bn in 2028-29.

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The opposition leader and shadow treasurer, Jess Wilson, has seized on the cash deficit figures to claim the government hasn’t delivered a “real” surplus.

“This doesn’t take into account the billions of dollars that is going into infrastructure spend – into roads, into schools, into hospitals,” Wilson told reporters on Monday.

“It’s all well and good for the premier and the treasurer to stand up and talk about a $700m operating surplus, but it does nothing to manage the debt bomb that is running under this government.”

December’s budget update showed net debt was expected to be $165.8bn at June 2026, rising to $192.6bn by 2028–29. However, it will stabilise as a proportion of the economy to about 25%.

The premier, Jacinta Allan, said the state’s economic growth – averaging 2.6% annually over the decade – has allowed the government to pay down debt and providing cost-of-living relief in the budget.

“We understand that it is important to drive down the percentage of debt as a share of the economy. We also understand in these uncertain times that it’s really important to help people,” she said on Monday.