2026-27 WA State Budget Update

In brief:

• The State Budget remains in an operating surplus, projected to record a $3.5 billion surplus in 2025/26, and remain in surplus across the forward estimates.
• Year on year expense growth is rising faster than revenue, with the projected rise in net debt to over $40 billion in 2026/27, before hitting $44.6 billion in 2028/29.
• Once again, significant unexpected revenue has been directed towards the Government’s medium-term priorities and the main pressure points of the WA electorate – housing, health and cost-of-living relief. 

But with debt due to reach the psychological and political barrier of $40 billion in the coming financial year (up to $44.6 billion by 2028/29), cost of living assistance has been reined in from COVID levels. 

The Government has announced it will proceed with voluntary redundancies for 1,500 public servants, arguably its first difficult decision in some time. This could be a reaction to the reported blow-out in public servants in recent years or just a sensible reshaping of the sector.

While Canberra rumours point to potential changes to tax and revenue measures in next week’s Federal Budget, the WA Government has continued to adopt a cautious and conservative approach with no revenue surprises to impact industry.

Budget Performance

The State Budget remains in an operating surplus, projected to record a $3.5 billion surplus in 2025/26, and remain in surplus across the forward estimates. Windfall revenues continue to arise from stamp duty, land tax, payroll tax, Commonwealth grants, royalties and Government Trading Enterprise dividends.

Underlying that result however is continued year on year expense growth, rising faster than revenue. Together with a still substantial Asset Investment Program, it’s driving the projected rise in net debt to over $40 billion in 2026/27, before hitting $44.6 billion in 2028/29.

The Government, however, is keen to point out that this level of debt is low relative to other Australian states, currently at 7.1 per cent of GSP, finishing at 8.9 per cent by 2029/30. By contrast, all other states are projected to be rising well into the double digits, with the mendicant Victorian debt burden due to plateau at around 20 per cent.

The budget papers highlight ongoing risks to fiscal performance, including from commodity prices (to both royalty income and payroll tax), the productivity commission review of GST grants, as well as ongoing geopolitical risks.

Western Australia is currently the only state or territory with a triple‑A credit rating from both S&P Global and Moody’s Ratings. This is a clear source of pride within the WA Government and remains a clear focus for the Treasurer and her Cabinet colleagues.

Key initiatives

This year, significant additional investments in pressing political priorities took centre stage – across housing ($4.7 billion), health ($9.1 billion) and cost-of-living relief (over $1 billion).

Budget day announcement honours went to cost of living relief, with $198 million for the novel Fuel Support Payment providing $100 to all Western Australians with a driver’s licence and $89.5 million to deliver a third round of the WA Student Assistance Payment.

Housing

• Increasing the first home buyer stamp duty exemption and concession thresholds by $100,000
• $250 million pre-sale guarantee to unlock more than 1,000 new apartments and townhouses
• Seven Cities initiative for Government Regional Officer Housing (GROH) and other government worker accommodation
• $2 billion joint investment with the Albanese Labor Government through the 100,000 Homes for First Homes Buyers initiative to deliver more than 34,000 new homes, including 11,000 exclusively for first home buyers
• $48 million to establish and expand housing and infrastructure advanced manufacturing facilities in Neerabup and Kwinana
• Additional $51 million focused on growing the construction workforce with an additional 330 places in the Group Training Organisation Wage Subsidy Scheme, low fee or free construction TAFE courses and extending the Construction Visa Subsidy and Build a Life programs, including a further 1,100 places.

Health

• Additional $1.5 billion to the Building Hospitals Fund to build, upgrade and maintain health infrastructure to deliver more than 900 beds
  • Includes the purchase of Mount Lawley Hospital, fully funding the Albany Health Campus expansion and a matched contribution to the Albanese Labor Government towards the Perkins WA Comprehensive Cancer Centre
• $414 million boost to mental health services over the next five years across the State.

Cost of living

• Third round of WA Student Assistance Payment
• $198 million Fuel Support Payment of $100 available to all WA drivers
• Continuation of free public transport on Sundays and for students traveling to and from school
• Ongoing capped regional airfares for regional residents
• Boosted supports for foster and grandparent carers, including increased foster carer subsidy and a new Foster and Grand Carer Gold Card.

Economic development and major projects

• $1.4 billion boost to the Clean Energy Fund for Clean Energy Link transmission projects
• $973 million investment to expand Western Power’s network and increase electricity capacity for industrial and residential developments
• $647 million for Westport, including Stage 1 Anketell Road upgrades
• $500 million Major Projects Fund to partner with the Commonwealth and industry to progress major projects such as Scitech and the Aboriginal Cultural Centre
• $85 million to support development of the green iron and steel industry
• $91.7 million from the Strategic Industries Fund has been allocated to enable key projects at the Western Trade Coast, Kemerton and Boodarie Strategic Industrial Areas
• $50 million investment in the Port of Port Hedland – funded by port users – to deliver the Channel Zone 5 Bypass, enhancing vessel safety and port efficiency
• $4.8 million for a business case for investment in additional capacity at the Port of Bunbury
• $57.3 million for planning and investigations into Perth’s next desalination plant
• $52.9 million through its new Regional Water Source Fund in water source planning and investigation in regional WA.

However, this year has also seen the Government pursue savings measures including:

• Reduced spending on consultants, advertising, temporary personnel, and travel spending
• Voluntary targeted separations scheme for 1,500 full-time equivalent general government sector employees
• Better revenue collection through increased tax compliance effort and sustained management and collection of tax debts
• The sale of surplus government land that will increase land availability for residential development (estimated to generate an additional $250 million to 2029/30 in this Budget).

Insight

Despite global economic headwinds, the WA Labor Government continues to benefit from strong growth across its main revenue streams – royalties, stamp duty and payroll tax.

The strong revenue has enabled the Government to focus on addressing the challenges facing the WA community, with significant expenditure in the health system, housing supply and cost-living-relief.

In many respects this budget doesn’t contain any new surprises and reflects the consistent, disciplined economic management of the Government since 2017.

The decision to utilise other relief mechanisms such as fuel support and student assistance payments rather than electricity rebates is noteworthy, particularly given the Government’s focus on the energy sector in WA.

The 2026/27 Budget, as a political plan, addresses some of the pain points in the electorate, provides comfort to ratings agencies and provides space for future funding challenges such as Westport and energy transmission infrastructure.

The Government will be acutely aware of the challenges around delivery of projects and the Opposition’s claims of being driven by announceables alone.

With almost three years until the next election, the Government has time on its side, but can’t afford delays or blow-outs, particularly on its housing initiatives.

Contact us

Reach out to our Western Australian team if you would like to discuss the new Western Australian Budget and what it means for you.

Bruce Campbell-Fraser, Partner and Perth Office Head – [email protected]

Joey Armenti, Senior Adviser – [email protected]

Cale Herbert, Associate Partner – [email protected]