MONDAY 19 OCTOBER 2026 – Victoria’s rising interest bill is on track to overtake spending on schools and revenue from major state taxes by the end of the decade, according to exclusive modelling by Positive Economics Advisory for AMPLIFY.
Interest already exceeds what the state spends on police, roads, public transport, water, and fire and ambulance services. In 2026-27, interest is 1.9 times the Victoria Police budget ($8.9 billion against $4.7 billion), and it is projected to pass primary and secondary school spending in 2029-30 ($11.8 billion against $11.6 billion).
Interest payments exceed payroll tax in 2029-30 on the state Budget’s own estimates, and are projected to pass stamp duty on transfer of land in 2030-31. Interest took 1 in 10 dollars of state tax revenue in 2020-21, takes 1 in 5 today, 1 in 4 by 2029-30 and is projected to take 1 in 3 by 2035-36.
Interest paid is $8.85 billion in 2026-27, rising to $11.79 billion in 2029-30 (Budget estimates) and a projected $22.71 billion in 2035-36 if growth rates persist.
The analysis uses the Victorian Government’s own Budget figures to 2029-30 and extends the trend forward to show when Victoria’s interest bill overtakes spending on key public services and revenue from major state taxes, if current Budget settings continue.
AMPLIFY Executive Director Martin Codina said the projections were alarming and reinforced the need for a credible plan to stop borrowing and pay down debt.
“This analysis paints a confronting picture. Victorians are facing the prospect of spending more on interest repayments than on police, public transport and, by the end of the decade, schools. This can't continue,” Mr Codina said.
“Right now, one in every five dollars Victorians pay in state taxes goes on interest. In less than 5 years it will be 1 in 4 and if this Budget trend continues it could be 1 in 3 within a decade.
“Victoria’s debt is approaching a tipping point. Political leaders need to confront this challenge now to avert a future crisis and so that taxpayers’ money is spent building the state's future, not servicing its past.”
Independent economist David Williams-Chen of Positive Economics Advisory conducted the Victorian Budget projections which found continued growth in interest payments would present significant future challenges for Victoria.
"Interest pays for past borrowing, not today's services. Some of that borrowing has built assets Victorians will use for decades, and it is reasonable to share that cost over time. But interest is now growing about twice as fast as both the tax revenue that pays for it and the spending on the services Victorians rely on," Mr Williams-Chen said.
“If that continues, interest will crowd out more and more of what the Budget can do. Closing the gap means some combination of stronger economic growth, which lifts tax revenue without raising tax rates, higher taxes, or slower growth in spending, through tighter priorities or more efficient service delivery. The longer the gap persists, the larger the eventual adjustment is likely to be.
"The growth in interest costs reflects two things working together. First, the state is still borrowing, so the debt that interest is paid on keeps growing. Second, much of the debt taken on when interest rates were at record lows is maturing and being refinanced at today's higher rates, which lifts the average rate paid across all of it. The Budget's own estimates show both effects out to 2029-30. Beyond that, our projection assumes the trend continues. If interest rates fall or borrowing slows, the bill would grow more slowly."
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