Mortgage repayment burden nears historic highs nationwide
Mortgage repayments are consuming close to a record share of household income across Australia, with New South Wales families carrying the heaviest average burden.
Figures compiled by NSW Treasury from Australian Bureau of Statistics data, property analytics firm Cotality and the HILDA household survey show that the average NSW family spent nearly 31 per cent of household income on mortgage repayments in June 2026. Queensland households paid more than 28 per cent, while South Australia and Western Australia were both near 26 per cent. Victoria was lower at just over 22 per cent.
The series, which extends back to 1994, showed that most states and territories were at or close to historic highs by mid-2026. The pressure persisted even as house prices declined. The report linked the downturn to four interest-rate increases during the year and federal budget changes affecting negative gearing and capital gains tax.
Repayment pressure rises fastest outside NSW
Although NSW had the highest burden in absolute terms, the deterioration since the pandemic was sharper elsewhere.
Between March 2020 and June 2026, mortgage repayments relative to earnings increased by 174 per cent in Western Australia, 152 per cent in Queensland and 140 per cent in South Australia. The corresponding increase in NSW was nearly 79 per cent.
With interest rates at a 15-year high and household budgets already constrained, governments are under pressure to moderate spending and reduce its contribution to inflation.
The NSW government said it would take a pledge to the March state election to reduce state debt by $10 billion and legislate a net-debt ceiling equal to 15 per cent of gross state product.
NSW Treasurer Daniel Mookhey said families in the state were being affected disproportionately by high rates. He argued that spending decisions in Australia’s largest state economy could influence the inflation and interest-rate outlook.
Queensland is also confronting fiscal pressure. S&P Global lowered the state’s credit rating from AA+ to AA in the previous month, its first downgrade in 17 years. Premier David Crisafulli attributed the state’s economic position to the former Labor government.
Rising debt costs narrow government options
Victoria, described in the report as Australia’s most indebted state, is forecast to see annual interest payments increase from $8.9 billion this financial year to $11.8 billion within four years. Its net debt was projected to reach $200 billion by mid-2030.
Federal Treasurer Jim Chalmers has said the Commonwealth is playing a helpful role in reducing inflation but does not regard federal budget settings as a primary source of current pressure, instead pointing to the conflict in the Middle East.
The article noted that federal spending grew at twice the forecast rate last financial year. Reserve Bank governor Michele Bullock has said government spending is contributing to inflation.
Independent economist Saul Eslake said restraint by NSW alone would have limited effect unless other jurisdictions also reduced spending. He identified cost-of-living payments as one area where governments could pull back and said Western Australia, Victoria and Queensland had been the largest users of such measures, with NSW not far behind.
SOURCE ATTRIBUTION:
Based on reporting by Madeleine Bower for The Australian Financial Review, published 14 October 2026.
