Auditor-General raises concerns about Victoria’s fiscal position amid $50.6bn losses

On Monday (24 November), the Victorian Auditor-General’s Office’s annual financial report for the Victorian government revealed that the state’s combined losses had climbed to $50.6 billion over the past six years, raising concerns about its long-term fiscal sustainability.

“The GGS maintained its fiscal cash deficit this year, a trend since 2016–17 that is expected to continue, further weakening the state's financial resilience. These persistent deficits highlight the state's reliance on debt to fund its capital infrastructure program,” the report read.

The Auditor-General noted that the state had narrowed its net operating loss to $2.6 billion in 2024-25, down from $4.2 billion the year prior. It had grown its operating revenue by $8.3 billion over the year, driven by a higher tax take and Commonwealth government grants.

Over the same period, operating expenses grew by $6.7 billion, driven by growth in employee expenses due to more staff and higher wages ($2.5 billion), higher interest expenses ($1.1 billion) and other operating costs ($1.6 billion).

The report found the Victorian government had made some progress in its 10-year COVID Debt Repayment Plan, which was introduced to help whittle down $31.5 billion in pandemic-related debt. The plan included a temporary levy applied to payroll and land taxes and efficiency initiatives to rein in government spending.

Since the launch of the debt repayment plan in 2023-24, the state government has collected $2 billion from the debt levy on payroll tax and $2.3 billion through the debt levy on landholdings.

In 2024–25, the payroll tax take rose by $547 million and land transfer duty by $828 million due to stronger economic conditions in labour and property markets, the auditor general’s report said. It also received $3.9 billion from a larger national GST pool and an increase in Victoria’s share.

The Auditor-General added that gross debt as a percentage of the state’s economy was projected to increase to 30.3 per cent by 2028–29.

“Managing debt at a sustainable level allows the government to borrow at a lower cost, allocate limited financial resources to essential services, respond effectively to future crises and ensure intergenerational equity,” the report read.

“Several measures of fiscal sustainability indicate that Victoria’s debt burden has increased while the state’s ability to service these debts has decreased.”

Looking forward, the Auditor-General outlined numerous emerging risks to the Victorian government’s fiscal position. These included the growing indebtedness of the state, rising interest costs and growing employee costs.

Other issues included cost blowouts in major infrastructure projects, rising services demand and a limited capacity to meet new revenue and income streams.

Overall, the Auditor-General found that while the Victorian government had taken “initial steps” to meet short-term financial targets, it failed to establish a strategy to strengthen its financial resilience over the long term.