Victoria faces severe debt‑affordability crunch

The Parliamentary Budget Office recently forecast that the gross debt of the states and territories will exceed $650 billion in 2026-27, up from just $266 billion in 2018-19. Gross state debt has increased sharply since the pandemic due to factors such as infrastructure spending and cost-of-living relief.

Moody’s notes that the Iran war has put additional pressure on state budgets, with Victoria most severely impacted.

Victoria’s debt is now $215 billion, equal to 30.7% of GSP – the highest of any state. Its economy is around 25% smaller than NSW’s, yet its debt is larger.

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About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.