But the current Middle East conflict is having an impact on the global and Australian economies, and while the situation remains uncertain, the effects are likely to be felt for some time.
Right now, rising fuel prices are the main risk to Victoria’s economy.
Victorian households are feeling the pressure at the pump and higher fuel prices add to the cost of doing business, increasing the risk of flow-on impacts to the price of other goods.
The broader economic impact of Donald Trump’s war in the Middle East will depend on the duration and extent of the conflict. It has created new uncertainty for Victorians, and for economies around the world.
But despite these global pressures, Victoria is prepared. Victoria’s economy is expected to remain robust and record solid economic growth, supported by growing household spending and ongoing strength in business investment.
Combined with a healthy labour market and an unemployment rate near historic lows, Victoria is well-placed to face the current global challenges – and to continue creating jobs and economic opportunities that benefit all Victorians.
General government fiscal aggregates
| Unit of measure | 2024-25 actual | 2025-26 revised | 2026-27 budget | 2027-28 estimate | 2028-29 estimate | 2029-30 estimate | |
|---|---|---|---|---|---|---|---|
| Net result from transactions | $ billion | (2.6) | 0.7 | 1.0 | 1.9 | 1.9 | 2.0 |
| Net cash flows from operating activities | $ billion | 3.2 | 6.9 | 6.5 | 6.3 | 6.5 | 6.5 |
| Government infrastructure investment (a)(b) | $ billion | 23.5 | 21.4 | 19.4 | 15.9 | 15.5 | 15.3 |
| Net debt | $ billion | 150.9 | 165.3 | 175.6 | 183.2 | 191.1 | 199.3 |
| Net debt to GSP (c) | % | 23.7 | 24.7 | 24.9 | 24.8 | 24.6 | 24.4 |
Sources: Department of Treasury and Finance
Notes:
(a) Includes general government net infrastructure investment and the estimated cash flows for public private partnership projects.
(b) Includes the estimated private sector construction-related expenditure associated with the North East Link held in the public non-financial corporations (PNFC) sector.
(c) The ratios to GSP may vary between publications due to revisions by the Australian Bureau of Statistics to GSP data.
Victorian economic forecasts (a)
| 2024‑25 actual | 2025‑26 forecast | 2026‑27 forecast | 2027‑28 forecast | 2028‑29 projection | 2029‑30 projection | |
|---|---|---|---|---|---|---|
| Real gross state product | 1.1 | 1.75 | 1.50 | 2.00 | 2.50 | 2.50 |
| Employment | 2.5 | 1.50 | 1.25 | 1.50 | 1.75 | 1.75 |
| Unemployment rate (b) | 4.4 | 4.75 | 4.75 | 4.75 | 4.75 | 4.75 |
| Consumer price index (c) | 2.4 | 3.50 | 3.50 | 2.75 | 2.50 | 2.50 |
| Wage price index (d) | 3.3 | 3.25 | 3.25 | 3.25 | 3.00 | 3.00 |
| Population (e) | 1.8 | 1.70 | 1.70 | 1.70 | 1.70 | 1.70 |
Sources: Australian Bureau of Statistics; Department of Treasury and Finance
Notes:
(a) Percentage change in year average terms compared with the previous year, except for the unemployment rate (see note (b)) and population (see note (e)). Forecasts are rounded to the nearest 0.25 percentage points, except for population (see note (e)).
The key assumptions underlying the economic forecasts include interest rates that broadly follow market economists’ expectations and an Australian dollar trade weighted index of 64.8. Oil prices (West Texas Intermediate) are assumed to average US$100/barrel in the June quarter 2026. Prices then gradually decline to around US$70/barrel by December 2026, and to around US$65/barrel by June 2027, broadly in line with the path suggested by oil futures.
(b) Year average.
(c) Melbourne consumer price index.
(d) Wage price index, Victoria (based on total hourly rates of pay, excluding bonuses).
(e) Percentage change over the year to 30 June. Forecasts are rounded to the nearest 0.1 percentage point.
Updated