Victoria's operating surplus has tumbled by $1.2 billion, the mid-year budget update reveals.
The state's prized $2.9 billion 2016-17 surplus forecast in the May budget has dropped to $1.7 billion.
Treasurer Tim Pallas blamed the reduction on continued infrastructure spending, investment in social services and a delay in the transfer of the Synchrotron research facility to the Commonwealth.
"The surplus is down from the $2.9 billion incorporated into the budget, but at $1.7 billion is still substantially and exceptionally high," Mr Pallas told reporters in Melbourne.
The figures have also been downgraded in the forward estimates, but Mr Pallas maintained Victoria was in a strong position.
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"Over the forward estimates (four years) it shows we have a $7 billion surplus going forward, one of, if not the highest allocation across the states and certainly the strongest one on a per capita basis," he said.
"These numbers are well and truly a demonstration of a surplus budget, a surplus economy that is performing in a AAA rated matter."
Shadow treasurer Michael O'Brien said the budget update was out of date - with no mention of the newly announced North East Link road project - and took aim at rising tax revenue.
"Taxes are up but the surplus has been slashed by 1.1 billion this year," he said.
"Daniel Andrews shouldn't worry about checking Tim Pallas' phone, he should check his calculator instead."
