The latest report-card on the state of the state budgets paints a sobering picture.

The Parliamentary Budget Office’s National Fiscal Outlook, released last week, shows that the budget repair task across the nation is immense, with debt leaping past its pandemic-era peak.

Australia has a national debt problem – indeed as we discovered last week, a $1 trillion problem for the federal government alone.

But the ticking time bomb is actually a state problem, with their share of national debt forecast to almost double in a decade, from 20 per cent before the pandemic to around 38 per cent by 2029-30.

As a result, states are having to divert revenue away from delivering essential services to pay interest on this growing debt. Costs vary between the states, but NSW gives us a sense of its scale – its Audit Office found that in 2024-25, interest on debt cost the state budget $19.6 million a day.

The PBO’s National Fiscal Outlook, or NFO, offers us some reassurance. In 24 of 27 modelled future scenarios, the national budget position is projected to return to a more sustainable position, where debt as a share of the economy trends downwards.

But, in reality, the budget repair task is set to get much harder. The modelled path back to sustainability assumes governments repeat past performance. But........

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