Victoria's general government net debt is forecast to be $175.6 billion at June 2027, or 24.9% of gross state product (GSP), according to the 2026-27 Victorian Budget released on 5 May 2026. The budget forecasts it rising to $199.3 billion by June 2030 while easing as a share of the economy to 24.4%. Interest on the state's debt is forecast at $8.9 billion in 2026-27.
How much debt does Victoria have?
These figures are from Table 1.1 of the budget paper 2026-27 Strategy and Outlook.
| At June | Net debt ($ billion) | Net debt to GSP |
|---|---|---|
| 2025 (actual) | 150.9 | 23.7% |
| 2026 (revised) | 165.3 | 24.7% |
| 2027 (budget) | 175.6 | 24.9% |
| 2028 (estimate) | 183.2 | 24.8% |
| 2029 (estimate) | 191.1 | 24.6% |
| 2030 (estimate) | 199.3 | 24.4% |
The budget paper says net debt is lower in every year than the forecast in the 2025-26 Budget Update, including by $1.5 billion at June 2029.
What is net debt to GSP?
Net debt, as the budget paper defines it, is borrowings, deposits held and advances received, less cash and deposits, advances paid, and investments, loans and placements. In plain terms, it is what the government owes after taking away the money and financial assets it holds.
GSP is the size of the state's economy. The budget paper calls the ratio "a measure of the size of the State's debt compared with the size of the economy." When the ratio holds steady, the economy is growing about as fast as the debt.
Victoria's fiscal strategy has five steps. The first three, creating jobs, returning to an operating cash surplus and returning to operating surpluses, are marked as done. Steps 4 and 5 are to stabilise net debt as a share of GSP and then reduce it. The budget has the ratio peaking at 24.9% in June 2027 and easing each year after.
How much does Victoria pay in interest?
Interest expense for the general government sector is forecast at $8.9 billion in 2026-27, rising to $11.8 billion by 2029-30, as the government continues to borrow to invest in infrastructure. Over the budget and forward estimates, interest is expected to take an average of 8.6% of total revenue a year.
| Year | Interest expense ($ million) |
|---|---|
| 2024-25 (actual) | 6,774 |
| 2025-26 (revised) | 7,853 |
| 2026-27 (budget) | 8,904 |
| 2027-28 (estimate) | 9,672 |
| 2028-29 (estimate) | 10,660 |
| 2029-30 (estimate) | 11,820 |
Across the wider public sector, which adds the state's non-financial corporations, gross debt is estimated at 201.5% of revenue in 2026-27, rising to 213.9% in 2029-30. The budget paper says the interest bill grows with the debt and as existing debt is refinanced at the prevailing market interest rate.
The budget also forecasts operating surpluses: $1.0 billion in 2026-27 and an average of $1.9 billion a year from 2027-28 to 2029-30. An operating surplus covers day-to-day spending. Net debt keeps rising because building infrastructure is funded with borrowing.
Why does the property market matter to state budgets?
Stamp duty on property sales, which the budget calls land transfer duty, is forecast to raise $10.0 billion for Victoria in 2026-27. The budget expects that revenue to fall in 2026-27, reflecting a cyclical decline in property market activity amid higher interest rates, before growing by an average of 7.4% a year over the forward estimates.
The budget was written in May, before the Reserve Bank lifted the cash rate target to 4.60% from 30 September 2026. Flat White's 6 October 2026 edition carried the broker view on all the states: as the property market cools, stamp duty revenue dries up. UBS estimates states could lose around $30 billion over 4 years, and RBC thinks there is a better-than-even chance that NSW and Queensland lose their AA+ credit ratings by the end of the year.
Source: ABS, State government budgets, Macrobond, UBS
What does state debt mean for jobs?
The state is a large employer and a large buyer of construction. In the 2026-27 budget, employee expenses are the largest expense line, forecast at $41.1 billion. Government infrastructure investment is forecast at $19.4 billion in 2026-27, down from $23.5 billion in 2024-25, and at $15.3 billion by 2029-30.
A smaller building program means less state government work for construction and engineering firms over the next four years. For now, those industries are growing. SEEK's August 2026 Employment Report has Engineering ads up 14.3% and Construction ads up 10.7% on a year earlier.
From Flat White: What your industry isn't telling you about your pay
Sources
Every page below was read on 8 October 2026.
- Victorian Department of Treasury and Finance, 2026-27 State Budget, Strategy and Outlook (PDF), 5 May 2026 (Table 1.1 net debt and GSP ratio, the net debt definition, interest expense, Table 5.6 gross debt to revenue, land transfer duty, employee expenses, infrastructure investment, operating surpluses)
- Victorian Department of Treasury and Finance, 2026-27 Strategy and Outlook (the page the budget paper is published on)
- Victorian Budget 2026/27, Delivering our fiscal strategy (the five steps and which are done)
- Reserve Bank of Australia, Cash rate target (4.60% from 30 September 2026)
- SEEK, SEEK Employment Report, August 2026 (Engineering and Construction ads on a year earlier)
Spotted an error? Correct something.
