THE Napthine government will unveil an unprecedented $11 billion election year war chest in a budget that includes plans to privatise the Port of Melbourne and the Rural Finance Corporation.
Stamp duty revenue from Victoria's resurgent property market has allowed the government to dramatically upgrade its surplus predictions since Treasury's last batch of forecasts in December 2013.
The expected surplus for 2014-15 has been revised up by $416 million to $1.3 billion. But the following year the windfall has been revised up by $1 billion, jumping to more than $3 billion, rising to $3.2 billion in 2016-17 and $3.3 billion in 2017-18.
Treasurer Michael O'Brien said the government would be able to fully fund an extensive major projects agenda from cash surpluses by 2015-16 without resorting to borrowing.
"These surpluses are what lets us build major projects without resorting to unsustainable debt," Mr O'Brien said. "They are the yin and yang to the infrastructure: you can't have one without the other."
The budget will also include plans for a new operator of the troubled Myki ticketing system, payroll tax relief for employers, a new rail tunnel to add capacity to the network, both sections of the East West Link, a rail link to the airport and money for new schools.
But it will come at a cost. The major projects agenda will be funded by a privatisation program expected to net at least $6 billion.
In a surprise announcement, Mr O'Brien on Monday revealed the publicly owned Rural Finance Corporation will be sold to the Bendigo and Adelaide Bank in a transaction that will net about $400 million.
The deal was made without a competitive tender process, meaning taxpayers will be in the dark over whether it represents the best value. It includes a guarantee that there will be no forced redundancies for three years and no loss of services for rural customers, but has left farmers worried about higher fees.
The government has also confirmed the budget will include plans to privatise the Port of Melbourne under a 40-year lease arrangement likely to net at least $5 billion.
Both the sale of the port and the Rural Finance Corporation will be eligible for a Commonwealth asset sale "recycling" bonus, offering federal payments worth 15 per cent of the sale price to states that sell assets and reinvest the money in productive major projects.
That means Victoria is likely to get at least $810 million extra from the Abbott government to help pay for its major projects agenda.
Meanwhile, a Labor analysis shows the Coalition has inflicted more than $11 billion worth of spending cuts since it came to office in December 2010.
Opposition finance spokesman Robin Scott said the cuts showed why the hospital system was in trouble, with schools falling down and the TAFE sector in crisis.
"Liberals always cut the services that families need," Mr Scott said.
Mr O'Brien said the bottom line had been helped by "significantly stronger" than expected stamp duty revenue for the current financial year, with solid economic and jobs growth.