Economic Recovery Victoria 2026: What the Parties Are Promising
Economic recovery is the big talking point heading into Victoria’s November 2026 state election, and fair enough too. Whether you’re running a cafe in Pakenham, working the vineyards in the Yarra Valley, or trying to keep a small business afloat in Bairnsdale, you’ve felt the pinch. From pandemic hangover to rising costs, the road back hasn’t been smooth for everyone.
With Premier Jacinta Allan’s Labor government seeking a fourth consecutive term against Jess Wilson’s Liberal/National opposition, the question on many voters’ minds is simple: who’s got the best plan to get Victoria’s economy firing on all cylinders again?
Let’s break down what each major party is promising, and what it might mean for Eastern Victoria.
Understanding the K Shaped Economy We’re Living In
Before diving into party policies, it’s worth understanding the landscape. Economists have identified what they call a K shaped economy, where different parts of the economy are performing at sharply diverging rates. Think of it like this: some sectors and people are doing brilliantly (the upper arm of the K), while others continue to struggle (the lower arm).
According to INTHEBLACK, during the pandemic lockdowns, there was a significant divide between public and private sector workers, with private sector wages declining while public sector wages increased. This split has created winners and losers in Victoria’s recovery, and it’s something Eastern Victoria knows all too well.
In regional areas like Gippsland and the outer metro sprawl of Pakenham and Monbulk, the divide is obvious. Tourism operators, small retailers, and hospitality venues in places like Mornington have faced ongoing challenges, while established professional services and larger enterprises have bounced back strongly.
Victoria’s Economic Recovery: Where We Stand Today
Victoria’s economy is forecast to grow by 2.5 per cent in 2025-26, following estimated growth of 2 per cent in 2024-25, according to the 2025-26 Victorian State Budget. Not bad, but not spectacular either.
The numbers tell an interesting story. Since September 2020, Victorian business investment has increased by 46 per cent, compared with 28 per cent in the rest of the country. That’s genuinely impressive. Employment has grown strongly too, with 648,800 Victorians finding jobs since the peak of the pandemic.
But here’s the rub: while the overall economy is growing, unemployment is expected to remain constant at 4.75 per cent, and wages are only just starting to outpace inflation. For many Eastern Victoria families, the recovery still feels pretty theoretical.
Labor’s Plan: Infrastructure Investment and Long-Term Growth
Labor’s approach to economic recovery is built around big infrastructure projects and targeted support. The Allan government argues they’ve successfully steered Victoria through the pandemic and are now focused on sustainable growth.
Their 2025-26 budget delivers a $1.6 billion surplus, though that’s down from earlier projections. The York Park Group analysis notes that Labor is banking on wages and the economy continuing to grow while making major savings through cuts to the public service.
Key economic recovery initiatives include:
- $150 million Victorian Investment Fund to attract private capital
- $318 million for free public transport for everyone under 18
- $4 billion for the Sunshine Station redevelopment
- $976 million to fix potholes and upgrade road surfaces
- Support for 27,000 households to install electric heat pumps
For Eastern Victoria specifically, the ongoing Metro Tunnel and North East Link projects are significant, though they’re more Melbourne-focused. Regional roads funding matters for areas like Gippsland and the Dandenongs, but critics argue Labor has historically favoured metro over regional development.
Labor’s pitch is essentially: steady as she goes, keep investing in long term projects, and trust that growth will flow through to everyone eventually.
Liberal/National Coalition: Back to Basics Economic Plan
The Liberal/National Coalition, now led by Jess Wilson after multiple leadership changes, is promising a fundamentally different approach. They’re calling it a back to basics economic plan focused on fiscal responsibility.
While the Liberal Victoria website isn’t loading current 2026 policies, their recent messaging and 2022 platform summaries give us a clear picture of their economic direction:
- Reining in government spending with expenditure constraints
- Reducing regulations to make it easier to do business
- Lower taxes and fees for households and businesses
- Focusing infrastructure delivery on practical projects
According to the Robert Menzies Institute, Victorian state debt is expected to reach $228 billion or 25 per cent of the state economy by 2028, while Victoria has the worst labour productivity in Australia and the highest state taxes in the country.
The Coalition’s argument is straightforward: Labor has overspent during the pandemic, debt is spiralling, and it’s time to tighten the belt and let the private sector lead the recovery.
For Eastern Victoria, this could mean less government infrastructure spending but potentially lower business costs and fewer regulatory hurdles. The Nationals component of the Coalition traditionally pushes for stronger regional focus, which matters for areas beyond the Melbourne metro sprawl.
The Greens: Sustainable Recovery with Quality Jobs
The Victorian Greens are taking a different tack, arguing that economic recovery needs to be tied to sustainability and addressing cost of living pressures head on.
Their approach focuses on:
- Creating quality jobs through sustainable initiatives
- Reducing cost of living through direct intervention
- Investing in renewable energy and green industries
- Supporting public transport and active transport infrastructure
For Eastern Victoria, the Greens pitch is particularly relevant in areas like the Dandenongs and Mornington Peninsula, where environmental concerns sit alongside economic ones. Their push for renewable energy investment could benefit Gippsland as the Latrobe Valley transitions from coal.
The Greens argue that tackling the climate crisis and creating economic opportunity aren’t mutually exclusive but rather go hand in hand.
One Nation: Restore, Reduce, Rebuild
One Nation’s Victorian branch, though smaller, offers the most direct critique of the current economic situation. Their platform focuses on three Rs: restore the credit rating, reduce taxes, and rebuild through encouraging private sector growth.
Their argument is that both major parties have mismanaged Victoria’s finances, and it’s time for a fundamental reset. They’re promising:
- Paying down state debt aggressively
- Cutting government waste and bureaucracy
- Reducing taxes across the board
- Encouraging business growth without government interference
It’s a small government, low tax message that resonates with small business owners who feel overtaxed and overregulated.
What Does This Mean for Eastern Victoria?
Eastern Victoria isn’t one homogeneous blob. It stretches from the outer Melbourne suburbs like Pakenham and Monbulk all the way through to coastal towns, farming communities in Gippsland, and everything in between.
The economic recovery challenge looks different depending on where you are:
Pakenham and Growth Corridors: These areas need infrastructure to keep pace with massive population growth. Housing affordability, transport links, and local job creation matter most. Labor’s infrastructure focus appeals here, but the Coalition’s promise to deliver projects more efficiently might too.
Monbulk and the Hills: Small businesses, tourism operators, and lifestyle communities need reliable services and lower operating costs. The regulatory burden and cost pressures hit hard here.
Mornington Peninsula: Tourism-dependent, facing housing affordability challenges, and dealing with seasonal employment issues. A mixed economy that needs both government support and private sector confidence.
Gippsland and Regional Eastern Victoria: Traditional industries like agriculture, forestry, and energy generation are in transition. These areas need genuine regional development, not just metro-centric plans with regional add-ons.
The Victorian farm sector provides some good news, with rural confidence hitting a four year high of 24 per cent as of December 2025, driven by favourable weather and rebounding livestock prices. That’s a positive sign for regional Eastern Victoria.
The Missing Piece: Public Private Partnerships and Innovation
Here’s something all the major parties could do better: genuinely strengthening public-private partnerships and investing in innovation hubs.
Victoria needs to move beyond the old argument of big government spending versus small government austerity. The best economic recovery will come from smart partnerships that leverage both public resources and private sector innovation.
Eastern Victoria is perfectly positioned for this. We’ve got:
- Universities and research institutions in Monash and beyond
- Agricultural innovation potential in Gippsland
- Tourism and hospitality expertise on the Peninsula
- Advanced manufacturing capabilities in growth corridors
What’s missing is a coordinated strategy to turn these assets into economic engines without relying purely on government spending or hoping the private sector figures it out alone.
The Debt Question Nobody Wants to Talk About
Let’s be honest about the elephant in the room: Victoria’s debt levels.
The state needs to address debt sustainably, but how do you do that without cutting essential services that Eastern Victoria relies on? Regional health services, education, public transport, roads… these aren’t luxuries, they’re essentials.
The Coalition’s spending constraint approach sounds responsible, but the details matter. Which services get cut? Where does the efficiency come from?
Labor’s continued investment approach keeps services running, but at what long term cost? At some point, the debt bill comes due.
One Nation’s aggressive debt reduction plan sounds tough, but the reality is that rapid cuts can choke off recovery before it really takes hold.
This is the toughest balancing act for whoever wins in November 2026.
What Should Eastern Victoria Voters Consider?
Here are the key questions to ask yourself when weighing up these economic recovery plans:
For your local area: Which approach will deliver the infrastructure, services, and economic conditions your community actually needs?
For your industry: Will lower taxes and fewer regulations help more than government investment in your sector?
For the long term: Is sustainable debt reduction worth potential service cuts, or is continued investment worth higher debt levels?
For regional development: Will metro-focused infrastructure eventually benefit you, or do you need explicit regional economic policy?
For inequality: Which approach is most likely to address the K shaped recovery and ensure the benefits flow to everyone, not just those already doing well?
The Bottom Line
Economic recovery in Victoria isn’t going to be simple, and it won’t be one-size-fits-all. Eastern Victoria’s diverse communities, from Pakenham’s growing suburbs to Gippsland’s agricultural heartland, need different things.
Labor offers stability and continued investment, betting that infrastructure and long term projects will deliver broad-based growth.
The Liberal/National Coalition promises fiscal responsibility and a leaner government approach, arguing that lower costs and less regulation will unleash private sector growth.
The Greens want to tie recovery to sustainability and direct cost of living relief.
One Nation calls for a fundamental reset with aggressive debt reduction and tax cuts.
The choice comes down to what you believe will work: steady government-led investment, fiscal constraint and private sector focus, sustainable transformation, or radical change.
Whatever you decide, make sure your vote reflects not just what sounds good, but what will actually deliver for your community in Eastern Victoria.
The Victorian state election is set for November 28, 2026. Make your vote count.
FAQ
What happens during an economic recovery?
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