While the Victorian government touts its economic success, a shocking decline in foreign investment paints a very different picture. This raises serious concerns about the state's taxpayer-funded growth strategies and the impact of its aggressive tax policies. But here's where it gets controversial: despite a staggering $400 million drop in foreign investment over two years, the government 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 the government's 'success' seem less impressive.
New data reveals a $5 billion plunge in global investment in Victoria’s property market over three years, a trend the industry squarely blames on the state’s tax regime. This isn’t just about numbers—it’s about jobs. The number of new jobs created through international investment backed by the Allan government plummeted by 59%, from 4,550 in 2024 to a mere 1,874 in 2025. Wages and innovation spending linked to foreign investment also took a nosedive, dropping by 51% and 52%, respectively.
Despite these alarming figures, the Department of Jobs, Skills, Industry and Regions boasted in its annual report that it had “significantly exceeded” its targets. However, this achievement loses its luster when you realize the targets were drastically reduced. A separate report by the Property Council of Australia highlights a 53% drop in global investment in Victoria’s property sector, from $10 billion in 2022 to $5 billion in 2025.
Here’s a bold claim: if Victoria were to slash its absentee owner surcharge on global investors, the state could generate an additional $5.7 billion in investment, $2.5 billion in GDP, and create 5,900 new jobs by 2030. But is this a realistic solution, or just wishful thinking?
Victoria’s absentee owner surcharge, which increased to 4% last year, is a major sticking point for foreign investors. Coupled with general land taxes, it makes Victoria and Queensland the only states to impose such charges on commercial properties. Economist Saul Eslake argues that Victoria’s tax regime and struggling economy—marked by high debt and low per capita GDP—are driving investors away. “Victoria is increasingly seen as a harder place to do business,” he warns.
But here’s a counterpoint: Eslake suggests that a drop in foreign investment isn’t all bad. Fewer foreign buyers in the residential market could make homeownership more accessible for first-time buyers. However, a decline in investment for new commercial or residential properties is a red flag.
Government agencies like Invest Victoria and Global Victoria are now under scrutiny as part of the Silver review, which aims to streamline or eliminate underperforming programs. Budget papers reveal that funding for trade and investment initiatives was cut by $18 million last year. Adding to the woes, Breakthrough Victoria, a private investment company established by the state, reported a $5.7 million loss in 2024-25.
Opposition spokeswoman Bridget Vallance criticizes the government for stifling investment with high taxes, excessive regulation, and policy uncertainty. She argues that lowering targets for jobs, wages, and innovation spending is a step backward. “The Allan Labor government is sending the wrong signals to investors,” she says.
Grattan Institute economist Brendan Coates points out that while taxes on foreign investment are punitive and may hinder new developments, they also provide a revenue stream for Australian taxpayers. It’s a delicate balance—one that Property Council Victoria CEO Cath Evans believes is tipping too far. She urges the government to reduce or eliminate foreign investor surcharges to boost housing supply and attract businesses.
As overseas investors now own nearly a quarter of Victoria’s debt, the state’s reliance on offshore lenders is growing rapidly. A government spokesperson defends its efforts, citing dedicated funding and initiatives to attract foreign investment. “Victoria has led the nation in business investment growth over the past decade,” they claim, highlighting innovation, established industries, and a skilled workforce.
But the question remains: is this enough to reverse the decline? What do you think? Are Victoria’s tax policies justified, or are they driving investors away? Share your thoughts in the comments below.
