On the night of 21 October 2021, the owner of a small Brunswick café stacked chairs onto tables for what she hoped, this time, was the last time. Her venue had opened and shut six times since March 2020, through Victoria's rolling run of lockdowns; each closure, a state grant — a few thousand dollars from the Business Support Fund, later a hardship payment, later payroll tax relief — was the difference between covering rent and shutting for good. When Melbourne's restrictions finally lifted just after midnight, she had lived through a cumulative 262 days of lockdown, the longest total endured by any city in the world (approx.; based on the tally of Victorian Chief Health Officer public health directions, March 2020 to October 2021). What she did not know that night was that the money borrowed to keep her doors from closing permanently would still be on the state's books, on a repayment schedule reaching into her tax bill, more than a decade later.
What the government did
Victoria's pandemic response ran in two phases that both cost money the state did not have. The first was suppression: six lockdowns between March 2020 and October 2021, driven by the 2020 second wave and the 2021 Delta outbreak, left Melbourne with the longest cumulative lockdown total of any major city (approx., based on the record of Chief Health Officer directions over that period). The second was support. The Andrews government, later continued under Jacinta Allan, funded business grants, payroll tax relief, health system surge capacity and household payments through emergency borrowing, because a state government's own revenue collapses at precisely the moment mandated closures make spending needs spike. Victoria's Parliamentary Budget Office put the state's direct pandemic investment at close to $40.1 billion (approx.), including more than $21.2 billion on economic support measures — over $14 billion of it channelled to businesses — while separate budget figures show around $16.3 billion went to health services between 2019-20 and 2022-23 as hospitals built surge capacity, secured protective equipment and ran the vaccination rollout (Parliamentary Budget Office Victoria, "COVID-19 pandemic — Victorian government policy response"; Victorian Budget 2022-23, "Managing the pandemic into the future," May 2022). None of that money existed in the budget before the pandemic; it was borrowed, and the government later put a precise figure on the resulting hole: $31.5 billion in expenditure incurred and revenue foregone, net of Commonwealth co-contributions, for pandemic-era activity delivered mainly between 2019-20 and 2022-23 — the slice of the state's finances it now calls "COVID debt" (Victorian Budget Paper No. 2, 2023-24 Budget, "COVID Debt Repayment Plan," May 2023).
How the debt is being repaid
In the same May 2023 budget that defined the $31.5 billion figure, then-Treasurer Tim Pallas announced the COVID Debt Repayment Plan: a commitment to raise an amount equivalent to the debt, including the interest on it, over ten years to 30 June 2033. The plan has three parts. The government pledged $2.1 billion in savings and efficiencies over the four years to 2026-27, mainly from cutting back-office, labour-hire and consultancy spending, while stating frontline services would be protected. From 1 July 2023, large businesses with national payrolls above $10 million began paying an extra 0.5 per cent in payroll tax, rising to an extra 1 per cent above $100 million, forecast to raise $3.9 billion over four years. And from the 2024 land tax year, most Victorian landholders began paying a flat surcharge of $500 to $975 depending on property value, with a further 0.10 percentage point added to the land tax rate on holdings worth $300,000 or more, forecast to raise $4.7 billion over four years (Victorian Budget Paper No. 2, 2023-24 Budget; State Revenue Office Victoria, "COVID Debt Repayment Plan"). Jacinta Allan became Premier in September 2023, four months after the plan was legislated, and has kept it unchanged.
The strongest case
No government had faced this before, and the alternative was a deeper wound
Put the government's defence at its best, and it starts with what a Premier actually knew in March 2020: no vaccine, no treatment, and early modelling — drawn from Victoria's own health advice and from overwhelmed hospital systems in northern Italy and New York — warning that an uncontrolled outbreak could exceed intensive-care capacity within weeks. Victoria's 2021 Delta-wave lockdowns followed the Commonwealth's decision to wind down JobKeeper that March, months before the state's vaccination rate was high enough to safely reopen, leaving the Victorian government as the only remaining source of income support for businesses it had ordered shut. Money spent keeping a mandated closure solvent is not the same as ordinary discretionary spending; independent economic analysis at the time warned that under-funding lockdown support risked a deeper, more prolonged contraction than the debt itself, through business collapses, mass unemployment and a slower recovery. Victoria was also not uniquely cautious by world standards — Buenos Aires ran a comparably long lockdown, and most advanced economies borrowed heavily through 2020-21. A reasonable observer, applying what was known at the time rather than hindsight, can conclude a government facing an unprecedented and lethal public health emergency made a defensible choice to spend first and count the cost later.
The evidence
The primary record shows how fast that borrowing arrived, and how carefully — or not — it was controlled while it did. Victoria's net debt stood at around $25 billion (approx.) at June 2019, before the pandemic. By June 2022, weeks after Melbourne's sixth lockdown ended, it had reached $99.98 billion — roughly a quadrupling in three years, concentrated almost entirely in the lockdown period itself (Victorian Department of Treasury and Finance, Annual Financial Report of the State of Victoria, 2021-22). Two ratings agencies moved during that same window: S&P Global Ratings stripped Victoria of its AAA rating in December 2020, cutting it two notches to AA and citing the deteriorating fiscal outlook; Moody's followed in February 2021, moving the state from Aaa to Aa1 and warning that Victoria's net direct and indirect debt was on track to exceed 200 per cent of revenue by 2024, up from 79 per cent in 2020 (S&P Global Ratings, rating action, December 2020; Moody's Investors Service, rating action, February 2021).
The Auditor-General's first look at the spending itself, tabled 27 October 2021, found the state moved fast but not always carefully. Victoria spent $4.4 billion on COVID-19 initiatives in 2019-20 alone, including $784.7 million through the first round of the Business Support Fund and $781.8 million on additional health equipment and ICT capacity — but most departments had inadequate documentation of critical-incident procurement and weak controls over conflicts of interest, the Department of Jobs, Precincts and Regions later found $13.85 million in overpayments to ineligible businesses caused by system errors, and more than $172 million of personal protective equipment became unusable after health authorities updated quality standards mid-pandemic (Victorian Auditor-General's Office, Management of Spending in Response to COVID-19, 27 October 2021).
The repayment task itself is a decade-long undertaking rather than a quick fix, as the plan's own first-term numbers show.
The critique
Two things separate a defensible pandemic response from where Victoria's pandemic finances stand today: whether the length of the shutdown matched the health gain it bought, and how carefully the resulting spending was controlled. On duration, Victoria's toll is unmatched: six lockdowns totalling 262 cumulative days between March 2020 and October 2021 made Melbourne, on the most widely cited tally of Chief Health Officer directions, the most locked-down city in the world (approx.) — ahead of Buenos Aires, and ten days longer than Sydney, which reopened from its own 2021 Delta lockdown on 11 October, having reached the same vaccination-linked reopening trigger. Every extra week under a mandated closure is also an extra week of Business Support Fund payments, payroll tax relief and foregone state revenue landing on the same $31.5 billion ledger; a state that keeps a city closed for longer than any comparable jurisdiction, even for defensible reasons, should expect that choice — not only the virus — to be reflected in the size of the bill it later asks Victorians to repay.
The Auditor-General's 2021 findings sharpen that point: money borrowed to respond to an emergency does not automatically become well-spent money. The $13.85 million paid to businesses that did not qualify for support, and the $172 million of protective equipment written off, were not caused by the pandemic — they were caused by how the response was run, under acknowledged time pressure, without the ordinary controls a slower rollout would have allowed (Victorian Auditor-General's Office, Management of Spending in Response to COVID-19, 27 October 2021). Waste on that scale does not erase the case for spending quickly in an emergency, but it means part of the $31.5 billion Victorians are now taxed to repay funded errors and unusable stock, not businesses saved or patients treated.
Victoria borrowed to survive an emergency whose length it largely controlled, and its own auditor found some of that money never reached anyone it was meant to help.
The repayment plan carries its own fairness problem. The payroll tax and land tax surcharges fall on whoever holds a taxable payroll or a landholding today, regardless of whether they existed, traded in Victoria, or received a cent of pandemic support between 2020 and 2022; a business that opened in 2024, or a landholder who bought a rental property last year, now pays toward a debt incurred entirely before either had any stake in the decision. The plan's own claimed contribution is also less solid than the government's messaging suggests: VAGO's audit of the savings target, tabled 30 July 2025, found departments reported meeting their combined $148.2 million savings and 1,132.5 full-time-equivalent reduction target for the first year, but that central agencies never required departments to define "frontline worker" consistently, only one of the departments examined tracked savings against individual initiatives rather than aggregate budgets, and none of the four departments examined could demonstrate they had assessed the impact of the cuts on service delivery — meaning even the $2.1 billion savings leg of the plan cannot yet be independently verified as genuine rather than an accounting reclassification (Victorian Auditor-General's Office, Delivering Savings Under the COVID Debt Repayment Plan, 30 July 2025). Even taken at face value, the combined $10.7 billion (approx.) the plan is forecast to raise from savings and both levies over its first four years covers barely a third of the $31.5 billion target, leaving the bulk of the repayment, and the accruing interest on it, to fall due through 2033 — a commitment now spanning several further state elections and governments the original pandemic-era decisions were not made by.
COVID debt vs structural debt — what's really driving it
Victoria's case for a genuine COVID-specific debt is real, not just rhetorical, and it should be credited before any other point is made. Melbourne endured the longest cumulative lockdown of any city in the world — 262 days (approx.) to October 2021 — and the Parliamentary Budget Office's estimate of $40.1 billion (approx.) in direct pandemic-era spending, plus the government's own $31.5 billion "COVID debt" figure, describe money with a clear, dateable link to the emergency: grants that kept mandated closures solvent, surge health capacity, the vaccination rollout. But the debt did not stop growing when the lockdowns ended in October 2021, and what has driven its growth since then is a different story from what drove it during the pandemic.
Victoria's net debt stood at $99.98 billion at June 2022, weeks after the sixth and final lockdown ended — essentially the closing balance of the pandemic-borrowing period (Victorian Department of Treasury and Finance, Annual Financial Report of the State of Victoria, 2021-22). By the 2026-27 Budget, handed down 5 May 2026, net debt had reached $175.6 billion (approx.) at June 2026, and Treasury's own forward estimates project it will keep climbing to around $199.3 billion (approx.) by mid-2030 (Victorian Department of Treasury and Finance, Budget Paper No. 2: Strategy and Outlook, 2026-27 Budget, 5 May 2026). Put plainly: Victoria has added on the order of $75 billion (approx.) in net debt in the four years since the last lockdown ended — comparable in scale to the entire increase recorded during the three pandemic years themselves — and essentially none of that later increase can be a pandemic cost, because there was no pandemic driving it.
- $31.5bn — the government's own "COVID debt" figure, the base for the repayment levies.
- $99.98bn → $175.6bn (approx.) — net debt's rise from June 2022 (lockdowns over) to June 2026, comparable in scale to the entire pandemic-era increase.
- $199.3bn (approx.) — net debt forecast for mid-2030, on the government's own current budget papers.
- $11.8bn a year (approx.), ≈$32m a day — interest costs on Victoria's debt forecast for 2029-30 (Victorian Budget Paper No. 2, 2026-27 Budget, 5 May 2026).
Independent analysis reaches a similar conclusion from a different angle. Michael Brennan, former head of the federal Productivity Commission and now at the e61 Institute, estimated on 16 May 2025 that of the roughly $125 billion (approx.) increase in Victoria's net debt between June 2019 and 2025, "perhaps $75 billion" could reasonably be attributed to COVID — leaving around $50 billion (approx.), on his estimate, driven by factors that predate and sit outside the pandemic (e61 Institute, Michael Brennan, "Victoria's fiscal predicament is worse than many realise," 16 May 2025). That structural component is not a post-pandemic surprise. The Andrews government's $40 billion Big Build infrastructure statement was unveiled in the 1 May 2018 Budget — two years before Victoria's first lockdown — and that same pre-pandemic budget already projected net debt would climb to between 5.4 and 6 per cent of Gross State Product over the following four years, on assumptions that had nothing to do with a pandemic that had not yet occurred. The Suburban Rail Loop, pitched that August at roughly $50 billion (approx.) for the full 90-kilometre project, was announced in the same pre-pandemic window (Victorian Department of Treasury and Finance, 2018-19 State Budget, 1 May 2018; Victoria's Big Build, Suburban Rail Loop project announcement, 29 August 2018).
The state's own operating result was sliding before the virus reached Victoria, too. The May 2019 Budget forecast a surplus of $1 billion (approx.) for 2019-20; by the December 2019 Budget Update that had narrowed to $618 million; and Victoria's Quarterly Financial Report for the nine months to 31 March 2020 — while the state's first lockdown was only days old — recorded an actual deficit of $773 million for the year to date (Victorian Department of Treasury and Finance, Quarterly Financial Report No. 3, 2019-20). Some of that slide reflects the summer's bushfire response, but the direction — a shrinking surplus turning to deficit before COVID-19 restrictions had run their course — shows the budget was already under pressure a pandemic did not create.
None of this erases the genuinely COVID-linked $31.5 billion, or the case made elsewhere on this page for why it was reasonably incurred. It does mean the "COVID debt" label, useful as shorthand for one ten-year repayment schedule, describes a shrinking fraction of a debt stock that is several times larger and still growing — mostly for reasons, chiefly the infrastructure pipeline and underlying spending growth, that the COVID Debt Repayment Plan's levies were never designed to touch and will not have resolved by the time they lapse in 2033.
The risk to the future
A decade-long, inflexible bill layered on top of Victoria's ordinary debt
The COVID Debt Repayment Plan is legislated to run to 30 June 2033 regardless of the state's economic conditions in any year between now and then — it does not pause in a downturn, and it does not accelerate if growth surprises on the upside. That rigidity is itself a risk: a flat payroll and land tax surcharge collected through a recession lands hardest exactly when the businesses and landholders paying it can least afford it, and a government wanting to respond to a future emergency the way Victoria responded in 2020 — with fast, large-scale borrowing — now does so from a credit rating already cut twice and a net debt base that had already reached nearly $100 billion before this repayment plan was even designed. The $31.5 billion COVID debt is, on the government's own accounting, a relatively contained and dateable slice of Victoria's finances; the deeper risk is that the mechanism built to repay it — a decade of earmarked taxes on whoever happens to hold a payroll or a title deed in Victoria between 2023 and 2033 — becomes the template for how the next crisis gets funded too, entrenching, one levy at a time, a pattern where each new emergency leaves behind a fresh, decade-long tax on people who did not make the decisions that caused it.