Victoria’s Auditor-General says the state will have to continue borrowing cash to fund major infrastructure projects.

Victoria's debt is expected to balloon by $29.7 billion over the next four years, after the state's debt burden jumped 26.4 per cent, or $13.1 billion, in 2018/19 to $62.9 billion.

The Victorian Auditor-General has released its annual assessment of the state's financial position.

The AG insists the debt remains serviceable and that Victoria is financially “well positioned”.

“The government's use of borrowings for major projects is an important source of finance, particularly in a low interest rate environment,” the report states.

The Melbourne airport rail, West Gate Tunnel, Metro Tunnel and level crossing removals are being funded in part by borrowed money.

The state government spent more than it took in the last financial year, with revenue of $78.6 billion and costs of $80 billion.

Victorian Treasurer Tim Pallas said the report confirmed the state is in a “solid financial position”.

The government has had to ramp up services, such as hospitals and schools, to handle a growing population.

“Victoria is not immune from the economic pressures felt across the world - but despite weaker national and international conditions, our economy remains strong,” Mr Pallas said.

The state's biggest operating expense is the public service, which currently costs $26.6 billion, after having increased by 40 per cent between 2013/14 and 2018/19.

The workforce grew from 217,000 to 263,000 in that time.

The public sector has grown by 21.1 per cent since 2014/15 compared to population growth of 11.9 per cent.

The auditor-general said it does not have a comprehensive or consistent way to measure how productive the workforce is being.

“Therefore, we cannot readily discern how much of the growth in the workforce is due to increases in the quantity and/or quantity of the goods and services being delivered, or the result of workplace inefficiency,” it said.

It noted that the public service growth could soon pressure the state's operating position.

“These expenses are difficult to reduce without reducing either the level or standard of service.”