Victorian budget 2024 as it happened: Cuts, delays, taxes revealed as treasurer hands down state budget

Treasurer Tim Pallas’ 10th budget comes full of bad news and with a $25 million-a-day interest bill. There’s a bit to unpack.

State political reporter Kieran Rooney has cut through the noise with this two-minute explainer.

Today’s budget includes an increase in funding for waterways across the state as the government looks to improve future water security and prevent environmental decline.

Key environment spending:

• $270 to protect waterways and catchments.
• $38 million to expand hot water rebates through Solar Victoria.
• $290 million to create new jobs for former forestry workers.

Environment Victoria said the $270 million for waterways was a positive sign, however, the budget would not address several of its key concerns.

Worrying gaps remained regarding the prevention of species extinction, it said in a statement.

Environment Victoria chief executive Jono La Nauze said up to one-third of Victorian plants, birds, reptiles, amphibians and mammals were at risk of extinction. He said the government had repeatedly failed to fund their protection.

“This budget repeats the pattern, and while there’s funding for forests now that state logging has ended, the lack of resources for biodiversity protection still leaves thousands of animals and plants headed for extinction,” La Nauze said.

He said the budget failed to ensure no one would be left behind as the state transitioned from fossil fuels.

La Nauze said government-owned renewables company, the SEC, and the Latrobe Valley Authority were supposed to help communities adjust to the challenges of the energy transition. He said both organisations had been neglected in the budget.

“We’re still waiting for the SEC to do what the government said it would – to start reinvesting in people and support households to electrify through new pilot programs,” he said.

Five years ago, when Treasurer Tim Pallas handed down the 2019-20 budget, the expectation was that the state’s net debt would reach $54.9 billion by the end of June 2023.

Of course, this assumption was made well before the COVID-19 pandemic struck. When June 30 ticked over last year, the state’s net debt was sitting at $115 billion, largely because of money borrowed to pay for the state’s COVID-19 recovery.

Net debt is set to keep increasing, reaching $187.8 billion by the middle of 2028.

The amount of interest the state government is paying on this debt has been rising. In 2027-28 the interest bill is expected to be about $9.4 billion.

Because there is still some time left in 2023-24, there isn’t a figure for interest expenses for this year just yet. However, the budget papers state that the interest expense was $4 billion over the past nine months.

Treasurer Tim Pallas has delivered his 10th state budget, revealing major products will be stalled and key promises will be abandoned.

Ishan Jagaty said the budget failed to properly fund improvements to Victoria’s public transport system or improve road travel to the city’s west.

Jagarty said he looked forward to the Metro Tunnel project bringing the latest trains to the north-western suburbs.

“However, it begs the question: why isn’t there a budget allocated to improving myki, which frankly, is sub-par? We deserve better technology,” he said.

“Delays in project completion and insufficient funding for road infrastructure raise concerns about the Victorian government’s ability to effectively meet demands.”

The government has spruiked a boost in hospital services funding of more than $340 million this year.

They highlighted investments into three big city hospital projects, including major upgrades to the Northern Hospital in Epping, which is getting a new emergency department, and the Monash and Austin hospitals.

However, only a fraction of the money for the $1.6 billion required for the three projects will be delivered in the coming year.

In a blow to North Melbourne residents, a plan to build new hospital campuses for the Royal Melbourne and Royal Women’s has been ditched because of Victoria’s signature Metro Tunnel project.

The treasurer announced on Tuesday that two medical towers planned for North Melbourne would now be built in Parkville, due to electromagnetic interference from the rail station.

Hospital spending key points:

• The “biggest hospital project in Australia’s history” will be radically redesigned after it was discovered it was no longer possible to build two towers near the new because of Arden metro station interference.
• The current Royal Melbourne and Royal Women’s hospital sites will instead undergo a major development.
• Three new community hospitals at Eltham, Emerald and Torquay, promised in 2019, are now under review.

What you should know: The government is spruiking investments in three big-city hospital projects, including major upgrades to the Northern Hospital in Epping, which is getting a new emergency department, and the Monash and Austin hospitals. However, only a fraction of the money for the $1.6 billion required for the three projects will be delivered in the coming year.

Read more on what budget decisions will affect you most in Broede Carmody’s quick guide to the budget.

In 2024-25, the state government expects to spend $98.3 billion and bring in $96.1 billion in revenue, which equates to a deficit of $2.2 billion.

This is less than some of the deficits recorded during the depths of the pandemic, when there was a deficit of $14.6 billion in 2020-21.

But in 2025-26 the budget is expected to go into surplus for the first time since 2018-19. A $1.5 billion surplus is on the cards for next year, with larger surpluses anticipated in the years that follow.

This graph shows whether the state budget has been in surplus or deficit over the past couple of decades.

The blue bars above the bold line are years that delivered a surplus, while the red bars under the bold line are years with deficits. The purple bars are the estimates from this year’s state budget.

Thousands of children in Victoria will miss out on hundreds of hours of free preschool promised during the 2022 election, as the state budget hits the brakes on billions of dollars in construction funding.

The Age last month revealed there would be significant delays to the government’s $14 billion Best Start, Best Life reforms, trumpeted as a win for working women and to improve the outcomes of Victorian children.

The program was due to finish by 2032, but its rollout will be slowed and is now not expected to be finalised until 2036-2037.

Treasurer Tim Pallas today said that the program, which he deemed “some of the biggest social reforms” in the state, would require 11,000 extra workers – more than double the current workforce.

The budget listed completion dates for $2.221 billion worth of construction supporting the rollout as “to be confirmed”. Last year’s budget had put the completion date at the end of 2027-28.

Read the full story here.

Leading ratings agency Moody’s has warned inflation will continue to put pressure on Victoria’s surging debt burden.

The state’s debt burden will continue to climb, according to Moody’s, driving projected net debt of more than $187.8 billion by the end of fiscal 2028.

Despite economic growth in Victoria and Australia more broadly, Moody’s said it did not expect Victoria’s debt burden to stabilise before then, maintaining negative pressure on the state’s rating.

Moody’s stripped Victoria of its AAA status in February 2021 and downgraded its rating from AA1 to AA2 in 2022.

While the budget introduced some new revenue initiatives and higher goods and services tax revenue, Moody’s vice-president John Manning said sustained inflation pressures would continue to drive expenditure growth that increased execution risk.

Average government expenditure growth is budgeted to increase by an average of 2.1 per cent a year between fiscal 2025 and 2028.

Moody’s said the expenditure growth may be difficult to achieve given upward pressure from inflation.