One in 10 Victorian public servants will lose their jobs and motorists will be slugged an extra $35 for their car registration as the state government boosts its budget surplus.
Some 3600 public service jobs will be cut, with unions and the opposition condemning the move and the timing of the announcement, 10 days before Christmas.
Treasurer Kim Wells said the reductions would come from administration staff and would not affect police, nurses, child protection workers or teachers.
"We believe 3600 is the right amount. It's that back-office, administration area that will not affect front-line delivery," he told reporters on Thursday.
Car registration fees will rise from $191.60 to $226.60 a year while stamp duty on new cars below the luxury tax threshold will go from 2.5 to 3.0 per cent.
Mr Wells said the changes would see the government post a $1.3 billion budget surplus in 2014/15, compared to the $181 million forecast in the May budget.
He said a healthy surplus would allow Victoria to weather the global financial uncertainty.
"We can no longer aim to run small marginal surpluses. We need to build the operating surplus to higher levels in order to fund infrastructure without increasing net debt," he said.
The opposition joined the public sector union in saying the job cuts would inevitably affect service delivery.
"These cuts will put pressure on those working at the front line, including teachers, nurses, child protection workers and police," Opposition Leader Daniel Andrews said.
His employment spokesman Tim Pallas said Mr Wells' announcement was worse than the Grinch's efforts to steal Christmas.
"The Grinch ultimately saw the error of his ways," he told reporters.
"I don't think Kim Wells will see the error of his ways."
The government said the car registration increase was required to fund a new licensing system for VicRoads, a project which was facing a $120 million shortfall.
But Mr Pallas said the government was raking in more than $600 million from the registration rise and tax on new cars.
"Effectively they're taking four dollars for every one they say they need to fund this project. It's a cash grab, an un-embarrassed, emphatic cash grab."
Community and Public Sector Union (CPSU) secretary Karen Batt said the job cuts meant the government was going back on election promises.
"I believe it's a betrayal. Pre-election the now-premier made a commitment to all public sector workers in this state that no one would be retrenched.
"He also made a commitment that he would fix baseline services. You cannot fix services if you are retrenching staff."
But the Victorian Employers' Chamber of Commerce and Industry (VECCI) welcomed cuts to what it believes is a bloated public service.
"The (government) should now conduct a wide-ranging review on the efficiency of back-office public service roles, with scope for privatisation, outsourcing and removal of duplication," VECCI chief executive Mark Stone said.
Announcing the Victorian budget update, Mr Wells said redundancies would shrink the public sector to 2007/08 levels after years of unsustainable growth.
He said the public sector had grown at an average of 5.3 per cent per year since 2006, compared to two per cent annual population growth.
"This growth has to be paid for and has been imposing a rising burden on the private sector," he said.
"The inevitable effect of spending growing faster than revenue is that surplus gets thinner and eventually disappears."
The redundancies would be voluntary and occur over the next two years, Mr Wells said.
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