Stamp duty slump puts state budgets under pressure
State budgets could be $30 billion worse off over four years if the property downturn continues to suppress stamp duty receipts, with New South Wales already recording a sharp decline in residential transaction revenue.
UBS economists modelled a 20 per cent fall in stamp duty income during 2026-27, followed by flat revenue in 2027-28 and a 10 per cent recovery in each of the next two financial years. Under that scenario, the combined loss across state budget forward estimates would reach about $30 billion.
NSW receipts fall as transactions slow
NSW collected $663.7 million in residential stamp duty during September, down 23 per cent from $864.3 million in the same month of 2025. It was the third consecutive month in which revenue had fallen by more than 20 per cent year-on-year.
The decline reflected fewer property transactions. A total of 13,814 properties changed hands in September, 20 per cent below the 17,164 transactions recorded a year earlier.
Veteran budget analyst Chris Richardson described stamp duty revenue as highly cyclical and said NSW and Victoria were particularly exposed because property-related taxes account for about one-third of their own-source revenue. The NSW budget released in June had already included a $5.4 billion reduction in projected property-tax collections over four years.
S&P Global warned that the wider property downturn could reduce state stamp duty receipts by an estimated $8 billion to $10 billion, or about 20 per cent, during the current financial year.
Victoria and Queensland face heightened exposure
UBS expected the downturn to have its largest budget impact in Victoria and Queensland.
Victoria’s budget was prepared before the Albanese government’s property-tax changes and therefore did not account for the subsequent housing slowdown, according to the report. Queensland had adopted a comparatively optimistic property-market outlook.
Richardson said the fall in transaction taxes could strengthen the case for states to move towards more stable land-tax systems. He argued that governments had shown little willingness to make that shift while stamp duty was producing strong returns.
Higher debt costs compound the budget strain
Weaker property-tax receipts are arriving as states also face higher bond yields and borrowing costs. UBS estimated rising yields could add about $3 billion to state government deficits over the four-year forward estimates.
UBS economist Stephen Wu said lower property-tax income and higher interest expenses could weaken budgets, particularly if governments did not fully offset the pressure through spending reductions or other revenue measures. Under that outcome, deficits could widen and some forecast fiscal tightening might not occur.
State debt has expanded substantially since the pandemic. The Parliamentary Budget Office projected gross state debt would reach $650 billion in 2026-27, compared with $266 billion in 2018-19. S&P expected the total to exceed $900 billion by the end of the decade.
S&P recently lowered Queensland’s credit rating from AA+ to AA, placing it at the same level as Victoria, the ACT and Tasmania. NSW avoided a similar downgrade after efforts to limit spending, the report said.
The Parliamentary Budget Office estimated that net state and territory debt per person by the end of the decade would range from $37,400 in the Northern Territory to $9,500 in Western Australia. Its estimate for NSW was $16,000 per person.
SOURCE ATTRIBUTION:
Based on reporting by The Australian Financial Review, published 13 October 2026.
