Mr Wells said he was facing ''the most difficult budget for at least a decade'', but insisted that going into deficit was ''not an option''. ''Conditions are tough, hard decisions had to be made, efficiencies had to be found but despite all this we are delivering a surplus,'' Mr Wells said. The deep cuts have allowed the government to predict a thin surplus of $155 million for 2012-13, rising to $861 million the following year. As part of its austerity plan, the government said it would shed a further 600 state public servants, bringing total public sector job losses announced since December to 4200 - the biggest mass sackings since Jeff Kennett became premier in the early 1990s. Mr Wells refused to rule out forced redundancies and further public sector cuts.

The government has also revealed plans to collect an extra $296 million in fines, with a one-off 12.5 per cent jump in penalties for misdemeanours such as travelling on public transport without a ticket or littering. The increase is expected to net the government an extra $110 million next financial year from speed cameras, police on-the-spot fines, toll evasion fines and other penalties - accounting for almost three quarters of the budget's surplus. Low-income families will no longer receive the school start bonus when their children start primary and secondary school, and the first home owners bonus for newly built homes will not be renewed once it expires in June. The government has also announced plans to squeeze hundreds of millions of dollars of additional dividends from government-owned enterprises, while spending on vocational education and training will be cut for 80 per cent of TAFEs and vocational courses. In response, some institutions have warned they may be forced to close. In a further hit to low-income earners, concessional discounts on utilities, health, social services and transport will be indexed by just 2 per cent next financial year - below the expected increase in the cost of living.

The government's political strategy is underpinned by a promise to build a war chest of surpluses to fund future infrastructure without taking on additional debt. Despite this, the budget papers show net debt is expected to peak at $23 billion in 2014-15. That is equivalent to 6.5 per cent of the state economy - above Treasury's prediction in December last year that it would peak at 6.1 per cent. But there were also sweeteners, with measures to ease traffic congestion, new regional trains, a $58 million manufacturing strategy, a 3 per cent reduction in WorkCover premiums to help cut business costs, and $366 million over five years to help protect vulnerable children. State Opposition Leader Daniel Andrews said the budget failed to create jobs, and said dumping the first home buyers bonus was indicative of a government lacking vision. ''That's bad for jobs, bad for regional Victoria, bad for people in construction,'' Mr Andrews said. ''No new jobs, no plan to deal with the challenges we face, just spin and rhetoric, a budget that fails the test of leadership.''

Australian Industry Group Victorian director Tim Piper said it was a pragmatic budget in a difficult time, treading a fine line between supporting growth without undermining the state's AAA credit rating. ''Funding for manufacturing is $14.5 million per year, which will not go far,'' Mr Piper said. ''Funding reductions cannot come at the expense of quality. Strengthening the nexus between skills, jobs and quality must be the principle upon which all reforms are based.'' The RACV's general manager of public policy, Brian Negus, welcomed new spending on three rail level crossing removals and various road upgrades. ''There is a lift in the speed cameras fines, which we think is an unfair impost on motorists … but looking forward what really is needed is a long-term investment strategy to make sure that the government is able to deliver big infrastructure projects,'' Mr Negus said. The budget predicts the state economy will bounce back, expanding by a solid 2.75 per cent in 2013-14, with jobs growth of 2 per cent. The state has been losing an average of about 900 jobs a week since September last year.

Loading After last year's budget, Mr Wells told Parliament he expected the state economy to create 50,000 to 55,000 jobs every year. Victorian Council of Social Service chief Cath Smith called the budget a mixed result for families. She welcomed extra spending on protection for vulnerable children and on drug and alcohol programs. But she criticised spending of hundreds of millions on new prisons.