A Shifting State: Fiscal Paths Diverge

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A Shifting State: Fiscal Paths Diverge

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Australia Viewpoint

Deficits persist in NSW and Queensland 01 July 2026

The 2026-27 Australian state budgets point to a shift toward more cautious fiscal Economics

management amid a softer macro backdrop. New South Wales (NSW) and Queensland Australia

remain in deficit and are on a gradual back-loaded consolidation path, despite structural Johnny Liu, CFA

spending pressures and uneven revenue growth. NSW is projecting a return to surplus in Australia & NZ Economist

2027–28, but property-related revenues are a key risk as housing momentum slows, Merrill+61 2 9226Lynch5054(Australia)

given NSW’s reliance on stamp duty. Queensland is not expected to return to balance johnny.liu2@bofa.com

until 2029-30, with debt continuing to rise as spending pressures remain entrenched, Isabel Hartstein

driven by commitments to health, housing, infrastructure and major projects, including FXMerrill& RatesLynchStrategist(Australia)

preparations for the 2032 Olympics. +61 2 9226 5868

isabel.hartstein@bofa.com

Surpluses for Victoria and Western Australia NickAustraliaStenner,& NZ EconomistCFA

Victoria has returned to a modest operating surplus in 2025-26 but continues to face Merrill Lynch (Australia)

nick.stenner@bofa.com

elevated debt levels and sizeable borrowing needs due to sustained infrastructure

spending. In contrast, Western Australia retains a position of relative fiscal strength,

with continued operating surpluses and low debt, although policy settings have turned

more expansionary through increased investment in housing, health and infrastructure.

Exhibit 1: NSW and QLD expected to remain in deficits

General government net operating budget ($bn)

5 MYFER: Mid-year Fiscal and

Economic Review

- NSW: New South Wales