Victoria's net debt prediction has jumped by more than $6 billion in six months and is now expected to reach $177.8b by 2027.
The state government attributes that to infrastructure investment, particularly extra funding for the North East Link, which has blown out from $10b to $26.1b, and associated freeway upgrades.
A 2023/24 budget update released on Friday by Treasurer Tim Pallas reveals net debt is expected to reach $135.5b by June next year.
It's then set to climb to $177.8b by June 2027, which is $6.4b higher than the estimate in the May state budget, representing 25.1 per cent of gross state product.
When asked if he expected debt to continue increasing at a rate of about $1 billion a month, Treasurer Tim Pallas pointed out the nation's cash rate had jumped 13 times over the last 18 months, which had "presented problems for everybody".
"The point I'm making is that there is a very substantial amount of debt the state is carrying that is also directly attributable to the movements in the cash rate," Mr Pallas told reporters on Friday.
The $35b Suburban Rail Loop is not specifically listed in the budget but instead there are provisions for it in contingency funds, Mr Pallas explained.
Asked if he expected the rail project's cost to also blow out, the Treasurer insisted government could not afford to "divest" in the community.
"I'm not going to prognosticate about how things are going to go," he said.
The state's deficit is now expected to be $3.5 billion this financial year, revised down from $4b.
Compared to what was predicted in May, tax revenue is tipped to jump by $900 million in 2023-24 and by $1.1b next year due to payroll and land tax increases.
The new short stay levy is expected to raise $37.5 million this financial year and $75 million per year after that.
Mr Pallas said the state's numbers were "improving" and he was "hearing loud and clear" calls for details on the government's plan to stabilise debt but that would have to wait until the next budget.
Opposition leader John Pesutto accused the government of taking Victoria in the wrong direction.
"We know that a big reason for this is total mismanagement by Premier Jacinta Allen of major projects in this state and we've seen today a combination of arrogance and incompetence," he said.
Mr Pesutto claimed the government's forecasts could no longer be relied on.
"It's not just the cost of projects blowing out, it's the debt and interest that we're all paying now," he added.
