Victoria once stood as Australia's manufacturing heartland and a magnet for enterprise. Under more than a decade of Labor rule, first under Daniel Andrews and then Jacinta Allan, now resigned and replaced by Ben Carroll, that position has been systematically dismantled. What business leaders are now telling the new premier is not a sudden complaint. It is the accumulated verdict on a governing style that treated private enterprise as a problem to be managed rather than a partner to be encouraged. The result is an economy that is, by multiple measures, going backwards.
The most visible scar is the debt. When Labor took office the state's net debt sat near $22 billion. By the end of the Andrews years it had multiplied several times over. Under Allan the trajectory continued upward, with projections climbing toward $200 billion and beyond. Interest payments alone now consume a punishing share of revenue: approaching one dollar in every ten in some estimates. That is money no longer available for hospitals, schools or the basic services governments claim to prioritise. It is the price of treating the public balance sheet as a political instrument rather than a constraint.
Infrastructure was sold as the justification. The Big Build was marketed as nation-building. In practice it became a byword for cost blowouts, opaque contracts and persistent allegations of rorting. Projects that were supposed to modernise the state instead modernised the art of fiscal overreach. The economic dividend that was promised has been slow to appear; the fiscal hangover is immediate and enduring.
Taxation and regulation completed the damage. Victoria has repeatedly ranked last or near last in Business Council of Australia assessments of the states as places to do business. Payroll tax thresholds and rates, land tax, stamp duty and a thicket of workplace and planning rules have combined to make the state uncompetitive. Businesses do not expand or relocate on sentiment. They respond to relative costs and certainty. When those signals turn hostile, capital and talent quietly leave. The official narrative of job creation and growth papers over a harder reality: much of the activity is concentrated in government-funded construction and public-sector employment, while private investment outside that orbit struggles.
The cultural posture mattered as much as the numbers. Successive Labor governments appeared to view business primarily as a source of revenue and a target of regulation. Consultation was performative. Policy was driven by union priorities and political theatre rather than a coherent growth strategy. When business leaders finally speak publicly about an economy "going backwards," they are describing the logical endpoint of that approach: higher costs, lower confidence, and a state that has traded long-term productive capacity for short-term political control.
None of this was inevitable. Other states managed infrastructure, population growth and post-pandemic recovery without loading future generations with comparable debt or driving business rankings into the basement. Victoria's decline was a choice, a sustained preference for spending, regulation and central direction over fiscal discipline and enterprise. The warnings now landing on the premier's desk are simply the market's delayed but unambiguous response.
Repair will require more than a change of leader. It will require abandoning the governing philosophy that treated the state's economy as something to be directed rather than released. Until that shift occurs, the damage will continue to compound.
https://www.macrobusiness.com.au/2026/07/victorians-brace-for-deep-austerity/