---
title: "Australia’s Mortgage Pain Is the Worst in 30 Years, and NSW Says the Cure Is State Austerity"
description: "Household mortgage burdens have jumped hardest in the cheaper states, and now the biggest state’s treasurer is promising to shrink his own budget to fight inflation"
author: "Nate Ledger"
published: 2026-10-13T07:55:04Z
modified: 2026-10-13T18:07:03Z
url: https://rews.cc/a/australia-s-mortgage-pain-is-the-worst-in-30-years-and-nsw-s-19cc0f
language: en
tags: ["housing", "inflation", "economy", "debt", "politics", "us", "europe"]
publisher: "Rews (https://rews.cc)"
---

# Australia’s Mortgage Pain Is the Worst in 30 Years, and NSW Says the Cure Is State Austerity

*Household mortgage burdens have jumped hardest in the cheaper states, and now the biggest state’s treasurer is promising to shrink his own budget to fight inflation*

By Nate Ledger · October 13, 2026 · https://rews.cc/a/australia-s-mortgage-pain-is-the-worst-in-30-years-and-nsw-s-19cc0f

## In brief

- Home loan repayments are stressing Australian household budgets the most in 30 years, with rates at 15-year highs
- The mortgage burden relative to earnings rose 174% in WA, 152% in Queensland and 140% in SA from March 2020 to June 2026, versus 79% in NSW
- NSW will take a $10 billion debt cut and a legislated 15%-of-GSP net debt cap to the March state election
- S&P downgraded Queensland to AA; Victoria’s interest bill is set to climb from $8.9b to $11.8b as net debt heads to $200b by mid-2030
- Saul Eslake says NSW cutting spending alone won’t move inflation if other states keep splashing cost-of-living cash

There is a tidy division of labor in Australian economic policy: the Reserve Bank sets interest rates, households pay them, and governments at every level spend money and then express concern about inflation. With rates at 15-year highs, that third part has become the uncomfortable one. New figures on home loan repayments, [reported by the Australian Financial Review](https://afr.com/policy/economy/how-much-households-are-spending-on-their-mortgage-by-state-20261013-p6154h), show mortgage stress in Australian household budgets is the worst it has been in 30 years — and the political system is now doing the thing it always does under stress, which is to ask whose budget caused it.

The state-level breakdown has a neat twist. New South Wales remains the most expensive housing market overall, as it long has been. But measured by *deterioration* — the change in the mortgage burden relative to earnings from March 2020 to June 2026 — the damage has been worse elsewhere. The burden skyrocketed by 174 per cent in Western Australia, 152 per cent in Queensland and 140 per cent in South Australia, against nearly 79 per cent in NSW. This is partly arithmetic doing narrative work: Perth and Brisbane were cheap six years ago, so a smaller dollar increase registers as a bigger percentage. But from the borrower’s kitchen-table perspective it doesn’t matter that your state’s percentage is inflated by a low base. Your repayment is the repayment.

![A cream-colored house is squeezed around its middle by a navy belt with a coral buckle against a teal background.](https://rews.cc/img/4c8ce2d4003799a8c682cfaa6726f573cce8d8b2.webp)

So, on Tuesday, the NSW government unveiled what it will take to the March state election: a promise to cut state debt by $10 billion and to legislate a cap on net debt of 15 per cent of gross state product. Treasurer Daniel Mookhey was wonderfully direct about the logic, telling reporters that families in his state are disproportionately affected by high interest rates and that “our decisions do matter when it comes to the interest rate outlook... I take the responsibility to help bring inflation down very seriously.” In translation: state government spending is part of the inflation problem, and the biggest state government in the federation is volunteering to spend less of it.

The mechanism here is genuinely awkward, and the independent economist Saul Eslake describes it well. One state’s virtue is roughly a free gift to everyone else. “If NSW made a conscious effort to reduce government spending that does have an impact on inflation, but all the other states just went about their merry way, then it probably wouldn’t make much difference,” he said. For a state-level pullback to bite on inflation, he argued, it would have to happen in other jurisdictions too — notably by avoiding cost-of-living handouts, which are the classic way of fighting high prices by pouring fuel on them.

![Three hands drop gold coins into a pot over flames while another hand pours water into it from a watering can against a blue background.](https://rews.cc/img/862bc11d3bc2ff9f19e9a24db7ca6b9a72b37139.webp)

A tour of those other jurisdictions suggests they are not exactly at the front of the austerity queue. S&P Global downgraded Queensland’s credit rating from AA+ to AA last month, the state’s first downward revision in 17 years; Premier David Crisafulli blamed his Labor predecessors for the economic position, which is the traditional first act of any premier standing in front of a downgrade. Victoria, the country’s most indebted state, is looking at interest repayments climbing from $8.9 billion this financial year to $11.8 billion in four years, with net debt projected to reach $200 billion by mid-2030. That is a state whose interest bill is growing $725 million a year, every year, on autopilot.

Then there is Canberra. Treasurer Jim Chalmers has previously said the federal government is playing “a helpful role” in the fight against inflation but that budget settings are not a primary driver of economic pressures — instead citing the war in the Middle East as a major cause. This sat slightly oddly alongside the final budget outcome released last month, which showed federal spending grew twice as fast as forecast last financial year. Whatever caused what, the RBA has its own view: governor Michele Bullock has previously said that government spending is contributing to inflation.

![A bellows shaped like a classical temple inflates a large red balloon, with a cream key hanging from its tied neck against a blue background.](https://rews.cc/img/7396cf18dd6884c6a438fd379c743d6ef0d1f49d.webp)

Eslake thinks the penny is now dropping, at least in one place: “I think the federal government is not giving any indication that it’s going to have any cost of living relief in the upcoming mid-year budget update, and they have pushed back on suggestions that they should cover the petrol excise again.” As for the states, his sentencing is memorable: “The worst offenders in throwing around cash in the name of cost of living relief were Western Australia, which has got money coming out of its ears, Victoria, which doesn’t, and Queensland. NSW was not far behind the other three.”

Anyway. The interesting structure here is that inflation-fighting-at-the-state-level is a collective-action problem with eight participants, each of whom benefits individually from announcing handouts and suffers collectively from the resulting rates. NSW is promising to be the one who unclogs the bar and orders seltzer — though it is worth noting that its $10 billion promise is an election pledge to cut *debt*, which in politics is often appetite deferred rather than appetite conquered.