• Total FY26 deficit across major states: $15.0 billion. 

• Capex volumes: Non-financial public sector investment is projected to hit $97.9 billion in FY26. 

• Structural weakness: Expense growth continues to outpace revenue across all states, with softening real revenue growth suggesting little room to manoeuvre. 

• Headline optimism, underlying erosion: While some budgets beat expectations (notably Queensland), others underwhelmed - NSW and WA being the most notable culprits. 

• Fiscal balance: A deeper-than-expected deficit of $21.1bn, worse than forecast by $3.7bn. 

• Contributors to deterioration: 

    - A softer GST pool. 
    - Expense overshoots and accounting anomalies in capital transfers. 

• The infrastructure engine continues: Capex remains elevated at $29.9bn. 

• The issue: The government has little room to manoeuvre, with expense commitments baked in, revenue growth anaemic, and capital programs politically immovable. 

• Fiscal outlook: Structural deficit persists through FY28. The state remains in a holding pattern - spending without serious structural reform. 

• Fiscal position: Deficit of $18.3bn. Broadly in line with expectations, reflecting disciplined planning. 

• Capex moderation: Significant tapering of capital spend forecast beyond FY26. 

• Positive signal: Expense growth has slowed, a marked improvement from past years. 

• But… Victoria’s debt burden remains high, and revenue remains tied to cyclical sources like land transfer duty. 

• Fiscal surprise: The budget beat expectations by $5.6bn, largely off the back of coal royalties and conservative assumptions. 

• Capex commitment: $23.8bn in FY26 - a sharp increase. 

• The challenge: Revenue volatility is real. Royalties that fund today’s surpluses may vanish tomorrow. 

• Debt path: Steepening materially over the forward estimates. Borrowings to fund capex, not reform. 

• Revenue upgrade: $2.5bn windfall largely ignored in fiscal planning. 

• Deficit position: Deteriorated despite elevated royalty income - underscoring WA’s own structural challenges. 

• Spending mix: Health and infrastructure drive up recurrent and capital budgets simultaneously. 

• The irony: A surplus-rich past has bred a complacency about tomorrow’s fiscal stress. 

• Budget deterioration: Driven by health, education and a robust capital agenda. 

• Borrowing pressures: Material upward revision to debt issuance across forward estimates. 

• Capex delays: Deferrals now appear not strategic, but necessary. 

• Structural outlook: Soft. Expense commitments exceed revenue prospects. Reform absent. 

The FY26 state budgets offer a convenient narrative of recovery and investment. Yet this narrative is thinly veiled. The underlying picture remains one of systemic imbalance - politically unpalatable reforms deferred, expense growth uncontained, and capital expenditure seen more as economic panacea than fiscal strategy. 
 
Queensland may be the exception - but it’s one carried by a once-in-a-generation royalty windfall. For NSW, WA, VIC, and SA, there is little evidence of long-term rebalancing. 
 
The risk remains clear: In the absence of bold tax reform, productivity improvement, and genuine expenditure prioritisation, Australia’s state governments will drift further into a path-dependent model of fiscal fragility.