Originally published by Damon Johnston, Anthony Galloway and Lily McCaffrey of The Australian.
06.05.2026
Victoria’s public service wages bill continues to spiral despite the government slashing hundreds of jobs, prompting warnings from international rating agencies that employee costs are undermining the state’s finances.
State budget figures confirm despite the job cuts – delivered as part of a $4bn savings round following the Silver review of the public sector – wages and costs will soar over the next five years.
Employee expenses are expected to rise from $40.3bn in 2025-26 to $41.1bn in 2026-27 and will continue to blow budget forecasts, jumping to $42.9bn in 2027-28, $44.4bn in 2028-29 and $45.5bn by 2030.
Fitch Ratings senior director Paul Norris said “gains” in the budget appeared to be offset by further spending commitments, including higher public sector wage payments “leaving operating outcomes slightly weaker on balance than the state’s mid-year budget update”.
S&P Global Ratings analyst Rebecca Hrvatin said “additional spending announcements not fully captured in the budget”, including “upcoming wage agreements”, could “weaken our expectations of Victoria’s fiscal trajectory”.
According to the Victorian Public Sector Commission, there were 322,266 FTE in the overall Victorian public sector at June 2025. The government slashed $4bn as recommended by the Silver review and has delivered a further $607m in cuts in this budget.
Asked about the escalating wages bill, Treasurer Jaclyn Symes said the government had been reducing non-frontline services across the public sector but it backed its frontline services.
“We back our teachers, our nurses, our police. We want more of these people employed, that’s why the figures go up,” she said.
Despite the Treasurer talking up the government’s financial management record, Premier Jacinta Allan’s department led the way in spending blowouts across key sectors including education, health, transport and justice.
The Department of Premier and Cabinet increased its expenditure by 23 per cent last year, partly driven by the cost of Indigenous programs and a jump in spending on advisers.
The two biggest spending departments – education and health – racked up massive blowouts. In education, the department blew its 2025-26 budget by about $250m and in health the overrun was about $1bn.
