Victoria Is Now Australia’s Toughest State to Do Business

For many Victorian SMEs, the day-to-day running of a business already feels like swimming upstream. Recent data from the Business Council of Australia reinforces that pressure, ranking Victoria as the least favourable state in Australia for starting, operating and growing a business. That doesn’t make success impossible, but it does mean operators are navigating conditions that are structurally tougher than in other parts of the country.

A combination of long-running economic, regulatory and demographic factors sits behind this environment. Victoria carries some of the highest property, land, stamp duty and payroll taxes in the country, which increases the cost base for businesses before they even begin operating.

The regulatory and compliance load from things like licensing requirements, planning approvals and environmental obligations often takes longer to process than in other states, slowing down projects and adding administrative overhead.

These issues are layered on top of broader structural pressures. Victoria’s state debt has risen sharply over the past decade, and the state’s credit rating has been downgraded, contributing to a climate of fiscal constraint.

Public-sector operating costs have continued to climb, and population growth has slowed relative to states like Queensland and Western Australia, who have attracted both businesses and workers in larger numbers. Victoria lost nearly 16,000 residents to interstate migration in 2023–24, the most significant drop nationally. Early 2025 data shows the trend continuing. Lower population and business growth translate into fewer new commercial opportunities and a generally softer demand environment. Confidence levels reflect this shift, sitting below neutral and signalling caution among operators, investors and project owners.

Specific industries are impacted harder

These wider economic conditions are felt most acutely in sectors that rely on predictable workflows and tight operating margins. In transport, logistics, manufacturing and labour-hire, slowing business confidence often leads to delayed project starts because clients take longer to commit to new work. Decision-making cycles become stretched as companies weigh risk more heavily than before. Payments can also take longer to arrive, as customers push out terms to preserve their own cash positions.

At the same time, operational costs have continued to rise. Many businesses across industries such as construction, manufacturing, transport, logistics and labour-hire report increased costs due to labour shortages, rising fuel prices and more demanding compliance requirements. When the broader state environment is sluggish, these pressures become harder to absorb, making cash flow less predictable and forward planning more difficult.

Victorians are finding a way through

Even with these challenges, Victorian SMEs continue to show the adaptability they’re known for. Many are placing greater emphasis on forward cash flow planning, forecasting well ahead of the next month and entire quarters to ensure they have enough buffer to absorb late payments or slow periods. Others are examining their cost structures more closely, reducing or renegotiating expenses that are no longer aligned with current conditions.

Some businesses are strengthening their resilience by taking a more structured approach to funding and risk management. This includes strategies like reviewing customer agreements and payment terms, as well as a strong focus on credit risk management. Using funding tools to bridge cash gaps created by slower payment cycles is something more businesses in Victoria are seeking guidance on.

These aren’t quick fixes, but they do help businesses maintain more predictable cash flow and make better decisions when conditions are uncertain. In a tougher operating environment, leaning on trusted professionals and finance specialists has become an essential part of navigating risk and staying in control of working capital.

Growth is still possible

Although Victoria’s conditions may be more challenging than those in other states, opportunity hasn’t disappeared. What it does require is a more deliberate and disciplined approach to decision-making. Businesses that maintain close visibility over their cash flow, stay agile in how they resource and deliver work, and adapt to slower decision cycles are still finding ways to move forward.

Growth is still possible; it simply demands sharper planning in a state where the broader economic climate is working a little harder against you.