Every state and territory treasurer in the country is staring down a debt bomb, and when it blows, it’s services that will take the hit.
It’s not Treasurer Jim Chalmers who has a budget deficit and booming debt crisis, his state counterparts are also having money problems. And it’s expected that state-provided services are set to be cut, all except one, which luckily has a ‘get out of debt’ card, like Chalmers, namely miners’ money.
AMP’s Shane Oliver last week reported that “monthly budget data to May shows the Federal budget deficit is continuing to come in way less than expected – at $10.9bn for the first 11 months of the 2025-26 financial year compared to the $18.5bn that Treasury was expecting for the same period.”
This wasn’t great budgeting by Jim but higher commodity prices from the likes of iron ore, copper, etc which gave him more tax revenue. “The June numbers won’t be so good, but the 2025-26 deficit looks to be on track for around $15bn, well below the May Budget forecast of $28.3bn, “ Oliver added. “The better revenue numbers will likely also flow through to lower starting point deficits in future years, but the key is that the Government bank the windfall as spending it will only inflame inflationary pressures.”
WA being a big mining state is also getting big windfall gains, thanks to its mining sector.
Today the SMH explains why this out-of-control debt blowout will hit state services. “Data compiled by ratings agency S&P Global show the interest on state debt is so large and growing so fast that premiers and state treasurers will have to make politically difficult trade-offs that could hit services or infrastructure,” wrote Shane Wright.
So, why have our state treasurers got a problem with debt? Here are a few reasons:
- Hangover debt from pandemic-era spending.
- A collapse in revenue from a slowing economy.
- The same higher interest rates that are hurting economic growth are blowing out the interest bill on debt for our states.
- The cost of major infrastructure projects have come in way greater than forecast.
- Political spending to win elections.
So, just how bad is the debt surge?
Here’s Wright again: “Ahead of COVID lockdowns, all states and territories had relatively small levels of gross debt, amounting to about $270 billion compared to the federal government’s $542 billion.”
Then WA was the biggest debt state at $51 billion but mining was in a hole then.
Here are some of the states with their exposed debt problems:
- NSW’s debt is forecast to grow by 331% between 2019 and 2030, reaching almost $273 billion and interest costs by the end of the decade are tipped to hit $11 billion.
- Victoria’s debt level is on track to soar by 427% to almost $291 billion in 2030, the interest bill for which will swallow almost $12 billion or 9.4% of its total outlays.
- Tasmania is the worst state for debt blowout, where the jump will be 552% by 2030.
The likes of Queensland, which faces big outlays for the 2032 Olympics has a debt problem now that’s bound to get worse, considering how unreliable building costs forecasts are nowadays. Its debt is tipped to be $216.5 billion by 2030.
Wright revealed the total blowout this way: “Overall state and territory debt is forecast to climb by 261 per cent between 2019 and 2030, from $270.5 billion to $976.9 billion.”
For optimists, the best hope we have is that a mining boom continues and interest rates fall, and a good global economic growth phase follows the end of the Iran war.
But then there are doubts whether the peace plan will hold.
Without the best scenarios prevailing, state governments will win elections first and then start cutting services. You can count on that!
how much longer can States keep on gomg further into debt?
surely there must be a day of reckoning
Bernie Treston
I thought you would mention the hit to Stamp Duty revenue due to the slow motion train wreck that is our property sector
Like the alcoholic, Borrowing will keep on going until it stops.
Dear Peter
as I have written here several times over the last few years that it is not hard for any reasonable pro Australian conservative and investor to understand and obviously see the permanently ever increasing debt of the federal and state governments would eventually lead to the reduction in both federal and state services. Saturation mass migration which was endorsed by the uni party caused increased borrowing and increasing spend on services by both federal and state. It was ok while some were making money from it but now home prices are reducing but taxes are increasing for real estate investments not to mention cgt taxes increasing you are worried. It was all laid out in Chalmers Intergenerational Report which shows an ocean of red in far into the future. No surprises for me. It was all very obvious. Kevin
Its not only the states, federally we are licked as well. The so called Chalmer tax reform – we are already seeing auctions down. Property values will follow. That must be hitting states harder in terms of stamp duty.
Peter, no surprises here. A bit of a mess I say. Services undoubtedly will be cut. Severe austerity plans will be required at a federal level as well. Is Albanese and Chalmers up to it?
I doubt it.
They just cannot keep looking for new taxes otherwise, there will be turmoil in the streets.
The REAL REASON for STATE and FEDERAL DEBT
is NOT the SPENDING on Services and Infrastructure , like NDIS ,
although THAT is what is DISHONESTLY claimed as the reason ,
it is…….AS PETER IDENTIFIED : ” Political spending to win elections ”
IN EVERY CASE , and IN EVERY STATE AND FEDERAL GOVERNMENT !
.
SO…..What can be done about it ?
NOTHING AT ALL while the THE PUBLIC KEEP VOTING THEMSELVES MONEY !
……………………….There are none so blind as those who WILL not see !!
.
.”There are none so blind as those who will not see” is a famous proverb that means it is impossible to help someone understand the truth if they are determined to ignore it . It highlights deliberate ignorance and willful blindness over any physical inability to see.
.
Does that mean that EVERYONE IS STUPID , GREEDY and SELF INTERESTED ?
.
NO……certainly not ! ……JUST ENOUGH TO VOTE FOR THE GREENS , TEALS and LABOR !
.
IF “we” don’t like it THEN “we” have to work harder and more effectively to CHANGE IT !
Western Australian State Budget Financial Breakdown:
Operating Surplus: $3.5 billion for the 2025-26 financial year .
Future Forecasts: The state is projected to run surpluses continuously, with net debt expected to peak around $33.2 billion before decreasing .
Debt Affordability: Interest on WA’s state debt accounts for a very small portion (2.4%)
of total government spending…..but at A$1.3 billion it is STILL nothing to be sneezed at !
[ It is STILL $A420—00 EACH , per person , man woman & child , EVERY YEAR !! ]
……………………………………………………………………………………………………………………………………………..
“NET DEBT expected to peak around $33.2 billion before decreasing .”
That is……………..A$33,200,000,000—00………………….WHICH IS HORRIFIC !!
That is……every man , woman and child in the state OWES A$10,800—00 !!!!
.
[ Western Australia’s population is approximately 3,076,500 .
The state continues to experience the fastest annual population growth rate
in the country at roughly 2.2%, largely driven by overseas migration ].
AND W.A. NEEDS EVERY CENT OF IT’S CURRENT GST TO PROVIDE THE INFRASTRUCTURE THAT IS REQUIRED TO MAINTAIN AND DEVELOP IT’S RESOURCES SECTOR …………….AND KEEP THE REST OF THE AUSTRALIAN ECONOMY AFLOAT !!!
………………………………………………………………………………………………………………………………………….
And DUE TO : Fiscal equalisation is a mechanism and policy objective in federal systems designed to reduce financial disparities between sub-national governments.
[ So the lasiest governments with the greatest “virtue signalling ” who REFUSE TO DEVELOP THEIR OWN STATE’S NATURAL RESOURCES are UNJUSTLY REWARDED
and PARASITISE THE PRODUCTIVE STATES !!! ]
WA receives the minimum floor GST distribution, which is only 75% of our per person share, below the national per person average and the LOWEST of any other state or territory.
Northern Territory (NT): ~$17,605 per person
Tasmania (Tas): ~$6,290 per person
South Australia (SA): ~$4,746 per person
Australian Capital Territory (ACT): ~$4,006 per person
Victoria (Vic): ~$3,647 per person
New South Wales (NSW): ~$2,940 per person
Queensland (Qld): ~$2,890 per person
AND LAST…AND SUBSTANTIALLY LEAST…..Western Australia (WA): ~$2,563 per person
.
AND THIS IS WHAT HAPPENS WHEN GREEDY and ENVIOUS
“PEOPLE VOTE THEMSELVES OTHER PEOPLE’S MONEY ” !!!
Failure to “develop” is “rewarded” …….THAT is SOCIALISM gone beserk……………….
in fact “Pliberserk ” ………….REGIS MINING in NSW cleared to OPEN a new mine at McPhillamy’s……………..blocked…..”A $1 billion gold project near Bathurst deemed unviable after the intervention of then-environment minister Tanya Plibersek”
Yep ! …….She sure ‘represents NSW’s best interests” …….you think !!?????