Victorian Budget 2025-26: Cost of living (still) in focus

In today’s Victorian 2025-26 Budget, the theme was ‘focusing on what matters most’. For Premier Jacinta Allan and new Treasurer Jaclyn Symes, this meant providing $2.3 billion in ‘record cost of living’ support, with much of this directed toward families.  

Receiving somewhat less focus was the State’s fiscal position. Though the Budget delivers a return to an operating surplus of $0.6 billion in 2025-26 (a key milestone for the Government’s fiscal strategy), major challenges persist. Cash deficits average around $8 billion over the forward estimates and interest payments on debt are worth around $740 million per month.   

Ahead of the Budget, significant focus was on the need to drive efficiency in the public service, with a review led by Helen Silver due to be released in June this year. However, the savings identified so far are relatively modest, at just $3.3 billion over the forward estimates (paling in comparison to a net debt result that reaches $194 billion in 2028-29). The Government should continue to look for cost savings, including through increased evaluation of programs and policies to determine where spending is the most effective.  

The Government continues to focus on long-term priorities through its vast infrastructure pipeline and investments in health and education. These initiatives will position Victoria well to support its fast-growing population in the decades ahead. But more can be done to enhance the productive capacity of the state today. Businesses regularly cite the challenges of operating in Victoria, with high tax burdens and dense regulation contributing to persistently negative sentiment about business conditions. Addressing these challenges, faced by businesses large and small alike, can enhance the state’s productivity and dynamism, which in turn will support the government in addressing its fiscal challenges.  

Cost of living 

Supporting Victorians with the cost of living was unambiguously the focus of the 2025-26 Budget, despite households already receiving some relief from falling inflation, rising real wages and lower interest rates.  

Over half of this support was explicitly directed towards families, with measures including free public transport for Victorians under 18, Free Kinder, funding for children to attend camps, sports and excursions, and 65,000 vouchers to support kids’ sporting costs.  

Undoubtedly, there are many families in Victoria for whom the battle to make ends meet has not ended with inflation coming down from its pandemic highs. Measures like Free Kinder, too, can help support labour force participation as well as giving all kids the opportunity to access quality early childhood education. But there is an unanswered question of whether better targeting some of this support may have meant that more could be done to support those in our communities facing real hardship. 

For these members of our community, measures like the $100 Power Saving Bonus for concession card holders and $18 million in food relief will be welcome. But these initiatives still account for just three per cent of total cost of living support announced today.  

Health 

A major focus of the Budget today was health, with over $11 billion allocated to meet the State’s care needs. This included $634 million to open and operationalise nine new or redeveloped hospitals, as well as $171 million for hospital infrastructure. $250 million will be spent to address ambulance waiting times and ramping, expanding emergency department capacity, and supporting Triple Zero Victoria – key challenges in recent years. 

A key priority was also expanding and making permanent the Government’s Community Pharmacy program, which enables Victorians to seek medical care from pharmacists instead of GPs. This program will help to alleviate some of the pressure on doctors, while facilitating access to routine but important medications and treatments.  

Meeting the state’s demand for mental health care will also be supported by $457 million in investment in expanded services.  

Housing 

To progress its ambition of delivering 800,000 new homes by 2034, the Government unveiled $407 million in the Budget to unlock government-owned land, support planning work related to its Activity Centre Program, and extend stamp duty concessions on off-the-plan apartments, units and townhouses.  

While the focus on boosting density around activity centres is positive, year to date commencements for multi-unit properties in the state lag behind housing starts, reflecting ongoing profitability challenges in the state. Improving housing affordability would be the most effective thing the Government could do to reduce cost-of-living support to households.  

Infrastructure 

The Government responded to ongoing criticism of the scale of its infrastructure program, outlining an ambition to return investment to pre-pandemic levels over the longer term. This would constitute a marked reversal of trends – in the nine years to 2023, there has been a more than fivefold increase in the number of major projects worth over $1 billion.  

In the immediate term, however, there is little indication of slowing things down, with over $7 billion of new capital projects announced, adding to the large infrastructure pipeline. This includes $4 billion for works at Sunshine Station, $727 million for the Metro Tunnel and $99 million to boost train frequency. Additionally, nearly $1 billion has been earmarked for fixing roads. It will be challenging for the Government to deliver on all the infrastructure projects in the pipeline.  

Energy and environment 

The Government did not make major announcements in the climate and energy space but is again leaning on the consumer to help achieve its net zero targets.  

This entailed extending $30 million in rebates to support adoption of heat pumps and solar water systems, and around $12 million for insulation installation through the Victorian Energy Upgrades program.  

Just $7 million is allocated to support timely environmental assessments, a key pain point in the energy sector. Additionally, there is little mention of adaptation or resilience measures, with focus instead on allocating funding after disasters occur. While these costs are inevitable, pre-emptive measures should receive more focus in future to minimise budgetary impacts. 

Business support 

There was relatively little in the Budget for businesses, and the Government’s rallying cry of ‘no new taxes’ will be of cold comfort for organisations already facing the highest tax burden of any jurisdiction.  

Measures under the Government’s signature Economic Growth Statement received just $172.5 million in funding. A key pain point for many businesses, regulatory reform received minor support with $3.5 million allocated to reduce red tape in the regions, and $16.8 million for halving the number of regulators by 2030. 

In positive news, over $34 million was allocated to help small and medium sized businesses identify new export markets. With Victorian businesses sending around 17 per cent of exports to the United States, these measures may help minimise disruption from recent trade measures.