Victoria needs to increase its debt if it wants to take full advantage of its AAA credit rating, historically low interest rates and build infrastructure, Treasurer Tim Pallas says.
Victoria is in a strong financial position, with a $1.2 billion surplus for the 2017/18 financial year and higher ones in the forward estimates, Mr Pallas told a post-budget business lunch in Melbourne.
Debt as a proportion of gross state product is now at 4.6 per cent, below the 6.2 per cent Labor inherited from its coalition predecessor, he says.
But there needs to be "a grown up discussion about debt" and Victoria's debt ratio needs to progressively move to six per cent.
"We need to bring (debt) up. We need to actually start to leverage the whole point of a AAA credit rating," Mr Pallas said.
"What's the point of a credit rating if you're actually not using it to secure the lowest possible interest rates you can and actually secure the infrastructure that grows a community and builds the services that the community not only deserves but demands?"
Net debt is listed as $23.8 billion for 2017/18, according to Tuesday's budget, and will rise to $25.1 billion the year after, then $27.4 billion in 2019/20.
Mr Pallas took another swipe at the federal government over the distribution of infrastructure money between states and disputed funds from the sale of the Melbourne Port lease.
Victoria says it deserves about $1.45 billion from the federal government under the asset recycling scheme when it leased the port.
It wants to put the money towards a regional rail program that many local federal MPs have been calling out for.
"It's hard to put a compelling argument against (the projects) unless of course it's something to do with mendacity," Mr Pallas said.
The Victorian budget is forecasting a $1.2 billion surplus for 2017/18 and Melbourne's property boom will rake in $8.4 billion.
Interest groups have flagged concerns the state is too reliant on property taxes, and that changes to duties paid by investors could cool the real estate market.
Earlier on Wednesday, Mr Pallas said he had been waiting for the market to slow, and that it needed to do so that first home buyers could "have a crack at it".
"I've been predicting, and accounting for, slumps in the property market for some time now, and they just haven't happened," he told 3AW radio.