While the Victorian government proudly proclaims its economic triumphs, a startling decline in foreign investment tells a very different story. This alarming trend raises serious concerns about the state's financial health and the effectiveness of its taxpayer-funded growth strategies. But here's where it gets controversial: despite a staggering $400 million drop in foreign investment over two years, the government boldly claims to have surpassed its targets. How is this possible? And this is the part most people miss: these targets were significantly lowered from the previous year, making them easier to achieve.
New data reveals a shocking $5 billion plunge in global investment in Victoria’s commercial and large residential property market over three years. The industry points fingers at the state’s aggressive tax policies, which include a 4% absentee owner surcharge on all property purchases by foreign investors—a fee unique to Victoria and Queensland. This tax, combined with general land taxes, has made Victoria an increasingly unattractive destination for international investors.
The consequences are far-reaching. The number of new jobs created through international investment backed by the Allan government plummeted by 59%, from 4,550 in 2024 to just 1,874 in 2025. Wages generated from these investments dropped by 51% to $230 million, and innovation expenditure fell by 52% to $205 million. Yet, the Department of Jobs, Skills, Industry and Regions still boasted of “significantly exceeding” its targets—a claim that feels more like spin than substance.
A report by Mandala Partners highlights that Victoria receives 40% less global institutional investment per capita than New South Wales. It argues that slashing the absentee owner surcharge could unlock $5.7 billion in additional investment, boost GDP by $2.5 billion, and create 5,900 new jobs by 2030. But is the government willing to take this step? Or will it continue to prioritize short-term revenue over long-term economic growth?
Economist Saul Eslake warns that Victoria is increasingly seen as a challenging place to do business, both domestically and internationally. The state’s high debt and low per capita GDP, coupled with its punitive tax regime, are driving investors away. “Investors are factoring in the increased risk of higher taxes and adverse policy changes,” Eslake explains. While a drop in foreign investment in established residential properties might benefit first-home buyers, the decline in new commercial and residential projects is deeply troubling.
Government agencies like Invest Victoria and Global Victoria are now under scrutiny as part of the Silver review, which aims to streamline state services. Budget papers reveal that funding for trade and investment programs was slashed by $18 million last year. Meanwhile, Breakthrough Victoria, a private investment company established to rebuild the state’s economy, reported a $5.7 million loss in 2024-25. Is this a sign of deeper systemic issues?
Opposition spokeswoman Bridget Vallance criticizes the government for sending the wrong signals to investors. “Cutting investment initiatives and raising taxes is stifling international interest,” she argues. Grattan Institute economist Brendan Coates acknowledges that while these taxes generate revenue for Australian taxpayers, they may also be killing off new development proposals. Property Council Victoria’s Cath Evans urges the government to reduce or eliminate foreign investor surcharges to boost housing supply and attract major companies.
As overseas investors now own nearly a quarter of Victoria’s debt, the state’s reliance on offshore lenders is growing rapidly. A government spokesman defends its efforts, citing dedicated funding and initiatives to attract foreign investment. But with hundreds of potential projects in energy, defense, digital technology, and advanced manufacturing on the table, will these efforts be enough to reverse the trend?
Here’s the burning question: Is Victoria’s tax-heavy approach a necessary evil for revenue, or is it a self-inflicted wound that’s driving away the very investment it needs to thrive? Share your thoughts in the comments—let’s spark a debate!
