- Analysis
- Politics
- Victoria
- Victorian budget
How much money COVID-19 era taxes are raking in for Victoria
By Craig Butt
Treasurer Tim Pallas has handed down his 10th budget, which sets out the state’s strategy for getting back to surplus and dealing with debt.
These six graphs break down expected sources of state tax revenue, whether the budget will be in surplus or deficit over the coming years and the scale of Victoria’s debt.
Breaking down the state’s revenue
The state government expects to bring in just over $96 billion in revenue in 2024-25.
Just under half of that amount is from federal government grants, while almost $39 billion is from state government taxes, which are broken down in more detail in the budget.
This graph shows where the tax revenue comes from:
The sections shaded orange are COVID debt levies introduced in last year’s budget, expected to bring in almost $2.3 billion next financial year. The levy on payroll tax applies to businesses with national payrolls of more than $10 million. When it comes to land, holdings between $50,000 and $300,000 are now subject to land tax, while the rate of land tax has increased by 0.1 per cent for holdings worth more than $300,000.
The blue section is the mental health and wellbeing levy introduced three years ago, which also applies to businesses with national payrolls of more than $10 million, with the money raised going towards funding mental health services.
Together, these levies are expected to bring in $3.3 billion next year, or 8.5 per cent of overall state tax revenue.
The COVID debt levies will be in place until 2033 and are expected to bring in almost $10 billion over the next four years.
Surplus or deficit?
In 2024-25, the state government expects to spend $98.3 billion and bring in $96.1 billion in revenue, leaving a deficit of $2.2 billion.
This is less than some of the deficits recorded during the depths of the pandemic. In 2020-21, for example, there was a deficit of $14.6 billion.
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 2025-26, 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 are years that delivered a surplus, while the red bars are years with deficits. The purple bars are estimates from this year’s state budget:
Putting debt in perspective
Five years ago, when 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.
This assumption was made 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.
Another way to put the amount of debt in perspective is to express it as a proportion of the state’s economic output, the gross state product (GSP). This helps to give a sense of the level of debt relative to the size of the economy.
As you can see, the state’s debt-to-GSP ratio is currently higher than it was during the recession in the early 1990s.
According to the budget’s estimates, net debt to GSP is expected to level out at about 25 per cent towards the end of this decade. This is based on the assumption that while the amount of debt and the amount paid in interest will keep rising, it will be offset by projected growth of the state’s economy.
In his budget speech, Pallas said the state’s economy was currently worth about $600 billion, but towards the end of the decade it would be worth nearly $750 billion. “The strength of this growth is helping to drive a reduction in net debt to GSP,” he said.
He added that part of the state government’s fiscal strategy with this year’s budget had been to stabilise net debt to GSP and that the next step would be to reduce the debt-to-GSP ratio.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.