The Victorian government will make $750 million in budget cuts over four years to address falling revenue.
The state is expected to post a $137 million surplus for 2012/13, compared to a $155 million surplus forecast in the May budget.
Premier Ted Baillieu says achieving the positive result requires some tough decisions.
He says there would be $750 million in cuts over four years mostly related to reducing back office costs.
"Victoria now has the strongest finances of all the states in Australia," Mr Baillieu said.
The savings measures include an increase in driver's licence renewal fees, and a two per cent efficiency dividend will be implemented across all government departments from January 1, 2014.
Treasurer Kim Wells said the three-year licence fee will increase from $50 to $70, while the 10-year licence fee will rise from $170 to $240.
"The reality with the driver's licence is that it was not paying for itself," he told reporters.
The occupancy requirement for the first home owners grant will be extended from six months to 12 months.
Mr Wells would not rule out further fees and charges increases in next year's budget.
The mid-year budget update released on Friday showed the state faces a $1 billion revenue shortfall.