Economists cast doubt on Victorian Liberal plan to cut taxes and return budget to surplus

Analysis suggests $9 billion hole in Coalition costings as Opposition Leader Jess Wilson defends her economic vision

By LineZotpaper
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Two leading economists have warned the Victorian Coalition's plan to deliver a cash surplus by 2032 while cutting taxes could worsen the state's already troubled finances, with one estimate suggesting a $9 billion shortfall in the opposition's costings.

RMIT professor of public policy David Hayward analysed the Coalition's election commitments and found a $9 billion hole. He said the plan did not add up, describing it as "all contradictory". Dr Hayward pointed to about $7 billion in tax cuts over four years, combined with a promise to return to a cash surplus in five years, as the core inconsistency. He identified $6.4 billion in spending cuts but also $3.4 billion in new spending initiatives. "There's savings, but they don't add up enough to compensate for the massive tax cuts," he said. He also warned that pausing the Suburban Rail Loop, where tunnelling is underway and $7 billion has already been spent, would blow a huge hole in the budget.

Opposition Leader Jess Wilson has promised to replace the emergency services volunteers fund with the old fire services property levy, cut land tax, remove payroll tax on private schools and remove stamp duty for first-home buyers. She said the Coalition had announced more than $24 billion worth of savings. "Only my team has a credible plan to actually see this budget repaired, to ensure we start paying down the debt in this state," she said.

Independent economist Saul Eslake said the Coalition could not achieve a cash surplus by promising tax cuts while continuing to spend. He urged Ms Wilson to "come clean" on her plans, warning that if elected she would either fail to put Victoria's finances on a sustainable trajectory or break election promises. Mr Eslake said Victoria needed a combination of spending cuts and revenue increases, but noted there was limited scope for tax increases given the state already has the highest tax burden.

The Victorian Chamber of Commerce and Industry has also called for fiscal discipline, with acting chief executive Amelia Bitsis warning the state is in a debt crisis. "Election commitments that increase spending without delivering a clear economic return will only make the challenge ahead greater," she said.

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Analysis

Why This Matters

  • Victoria's budget deficit and debt levels are central to the 2026 state election campaign, with both major parties promising fiscal repair.
  • If the Coalition's plan is found to be unachievable, it could undermine voter confidence in the opposition just weeks before pre-polling opens.
  • The outcome will affect public services, infrastructure projects like the Suburban Rail Loop, and the state's credit rating.

Background

Victoria's finances have deteriorated significantly under the current Labor government, with the state carrying the highest debt of any Australian state. The Liberal opposition has made fiscal discipline a key campaign theme, promising to end "waste" in the public service and on major infrastructure projects. The Coalition's tax-cut proposals come as the state budget faces ongoing pressure from rising interest costs and spending demands.

Key Perspectives

Economists (David Hayward and Saul Eslake): The Coalition's plan is contradictory, with tax cuts outpacing identified savings. They argue a return to surplus by 2032 is implausible without either deeper spending cuts or breaking tax-cut promises. Opposition Leader Jess Wilson: The Coalition has a credible, costed 10-year plan to repair the budget, in contrast to Labor's record of debt and waste. She says only her team has announced significant savings. Victorian Chamber of Commerce and Industry: The state needs disciplined, targeted policy focused on restoring fiscal stability and creating conditions for business investment, not spending without clear economic returns.

What to Watch

  • Whether the Coalition releases additional savings measures before pre-polling centres open in just over four weeks.
  • The impact of the economists' criticism on voter perceptions, particularly among business and swinging voters concerned about debt.
  • Any independent costings or fiscal analyses released by other bodies, such as the Parliamentary Budget Office.
  • The position of minor parties and independents on budget repair, which could influence post-election negotiations if no majority government is formed.

Sources

Checked

12 claims in this story checked against 1 source: 11 supported.

Show each claim
  1. SupportedEconomists have cast doubt on the Victorian Liberal plan to cut taxes and return the budget to surplus.Just In: “Economists question Victorian Liberal plan to deliver surplus while cutting taxes.”
  2. Partly supportedTwo leading economists warned that the Coalition plan could worsen Victoria's finances.Just In: “Victoria's troubled budget would get worse under a Coalition government, two economists have warned”
  3. SupportedDavid Hayward's analysis found a $9 billion hole in the Coalition's costings.Just In: “RMIT professor of public policy David Hayward, who conducted the analysis that found the $9 billion costings hole, said the plan did not add up.”
  4. SupportedThe Coalition plans to deliver a cash surplus by 2032.Just In: “Ms Wilson is promising to deliver a cash surplus by 2032, partly funded by a 10-year freeze on public service hiring.”
  5. SupportedHayward described the plan as “all contradictory”.Just In: ““It's all contradictory,” he said.”
  6. SupportedHayward pointed to about $7 billion in tax cuts over four years alongside a promised cash surplus in five years.Just In: ““She's led with something like $7 billion of tax cuts over four years, while promising in five years' time to return the budget to a cash surplus.””
  7. SupportedHayward identified $6.4 billion in spending cuts and $3.4 billion in new spending initiatives.Just In: “He identified spending cuts of $6.4 billion but also $3.4 billion in new spending initiatives.”
  8. SupportedHayward said: “There's savings, but they don't add up enough to compensate for the massive tax cuts.”Just In: ““There's savings, but they don't add up enough to compensate for the massive tax cuts,” he said.”
  9. SupportedWilson said the Coalition had announced more than $24 billion in savings.Just In: “Ms Wilson refuted criticism of Coalition costings, stating that the opposition had announced more than $24 billion worth of savings.”
  10. SupportedWilson said: “Only my team has a credible plan to actually see this budget repaired, to ensure we start paying down the debt in this state.”Just In: ““Only my team has a credible plan to actually see this budget repaired, to ensure we start paying down the debt in this state,” she said.”
  11. SupportedSaul Eslake urged Wilson to “come clean” on her plans.Just In: “He said Ms Wilson needed to “come clean” on her plans to get Victoria's finances on a more sustainable footing.”
  12. SupportedAmelia Bitsis said: “Election commitments that increase spending without delivering a clear economic return will only make the challenge ahead greater.”Just In: ““Election commitments that increase spending without delivering a clear economic return will only make the challenge ahead greater,” she said.”

Zotpaper

Written by June Katz on the Australia & local desk. Claims checked by Ines Fairley, verification. Edited by Angus Burke, chief sub.

1 source11 of 12 claims matched to a sourcefirst published 19 Oct, 5:44 am
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