On this occasion, Victorian voters have little cause for complaint

Victoria will benefit from an additional $14.45 billion during the next four years as Treasurer Jim Chalmers seeks to ease fiscal pressure on the nation’s fastest-growing state.

In previous years, the Victorian government grizzled about being short-changed funding needed for public hospitals, schools and major transport infrastructure. Chalmers’ fourth budget, however, leaves little room for complaint as the nation approaches an election in which Victorian voters could play a critical role in deciding the next federal government.

Prime Minister Anthony Albanese with Victorian Premier Jacinta Allan at a school in January. Hospitals have overtaken schools as the largest target of federal government funding.Credit: Wayne Taylor

Compared to a year ago, when the last federal budget was delivered, Victoria’s total payments from the Commonwealth are up by an average of $3.6 billion a year between 2024-25 and 2027-28, totalling more than $14 billion.

Where Victoria previously expected to receive $45.36 billion in total payments in 2025-26, that amount has increased to $50.67 billion.

Victorian Premier Jacinta Allan and Treasurer Jaclyn Symes delayed their state budget until after the federal election, which is expected to the held on either the first or second Saturday in May.

The extra money reflects newly reached funding agreements for schools and surging demands for hospital services. Budget papers show that in 2025-26, public hospitals will overtake schools as the largest target of Commonwealth funding.

This restores the normal pecking order of budget demands. Where specific purpose payments from the Commonwealth for schools are forecast to grow by 17 per cent across the forecast years, payments for hospitals will grow by 28.5 per cent over the same period.

The federal government’s “national health reform agreement” with the states and territories will take $1.77 billion off the Commonwealth’s bottom line. The extra money for schools shaves off a further $407 million.

The major infrastructure projects in Victoria funded by this budget were previously announced – $2 billion towards the $4 billion overhaul of Sunshine station to open rail capacity to the airport and in Melbourne’s west; $1.1 billion for upgrades along the Western Highway; and $1 billion for a further “road blitz” in Melbourne suburbs.

Victoria’s share of the infrastructure pie is comparable to NSW on a per capita basis. Queensland, with $7.2 billion in upgrades to the Bruce Highway, has the largest funding for any infrastructure project.

Victorian Transport Infrastructure Minister Gabrielle Williams, federal Infrastructure Minister Catherine King and Melbourne Airport chief Lorie Argus announced new funding for Melbourne’s airport rail project on March 20.Credit: Wayne Taylor

Labor nearly wiped the Liberal Party off the map of greater Melbourne in the 2022 federal election. It heads into this year’s campaign defending 24 Victorian seats and holds all but two across Melbourne.

The Peter Dutton-led opposition, to have any chance of forming government, must win back marginal Victorian seats held by Labor in Aston, Chisholm, McEwen and Dunkley, and lay siege to traditionally safer electorates like Bruce, Hawke and Holt.

Damage done to the ALP brand by an unpopular state government is expected to be a drag on Labor’s vote in Victoria. However, the state’s projected debt of $187.8 billion is dwarfed by the $1.23 trillion pile – and dept to GDP ratio – forecast to be accumulated by a returned Albanese government.

The budget papers include the latest ABS population forecasts which reaffirm Victoria as Australia’s fastest-growing state, with 544,000 people expected to be added between now and the end of 2029.

The main driver of Victoria’s population growth – net overseas migration – is expected to slump to its lowest rate in a decade, as international students who came to Melbourne to study immediately after the COVID-19 crisis complete their courses and go home.

The impact of this will be acutely felt in a state which relies on international students and tourists as its largest two sources of export revenue.

Where international arrivals for all states and territories outstripped departures by 435,000 people in 2023-24, the number for the current financial year is forecast to drop to 335,000. By 2026-27, it will further slump to 225,000.

If this number is realised, it will be Australia’s lowest net overseas migration recorded outside the pandemic years since 2015-16.

The budget papers note that the fall-off in net migration – and stabilising of Australia’s population growth – is the product of fewer people arriving over the next four years and, in the short term, a mini exodus as the visas of temporary migrants expire.

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