The aggregate national fiscal position, which combines the commonwealth and state and territory budgets, was broadly unchanged compared to the previous year's outlook, the office said in a report on Wednesday.
But the states faced common risks in their efforts to return to surplus over the medium term.
Given states' dependence on stamp duty on property transaction, the deepening national housing downturn - exacerbated by the federal budget's changes to investor tax breaks - risked drying up the vital revenue stream.
"The New South Wales, Queensland, Western Australian and ACT budget papers noted the potential risk of a housing market slowdown on property tax revenue, particularly stamp duty, from declines in property transactions and house prices," the PBO said.
Queensland and WA were also at risk from fluctuations in commodity prices and mining royalties, the report warned.
Higher fuel prices from the Middle East conflict still risked driving up inflation and interest rates, which would weigh on household spending, house prices, employment and borrowing costs, further weakening the overall fiscal position.
National debt levels are forecast to exceed the highs experienced during the COVID-19 pandemic, with gross debt set to rise to 58 per cent of GDP by 2029/30.
But while spending has exceeded forecasts across jurisdictions, higher-than-expected revenue has kept Australia's combined public finances relatively stable and improving over the four-year forward estimates period.
"The PBO's fiscal sustainability analysis shows that in 24 out of 27 scenarios, national debt-to-GDP is expected to trend downwards over the 40-year period," the PBO said.
"This suggests that the national fiscal position is likely to remain sustainable except in the most extreme cases, where state budget balances do not improve while interest rates are high or GDP growth markedly slows."
Australia's fiscal sustainability was confirmed by ratings agency Moody's on Tuesday, which reaffirmed the nation's AAA credit rating.
The nation's "very high economic and institutional strength, with robust government finances" underpinned the rating, Moody's said.
Australia remained one of nine countries to hold the top credit rating with all three major ratings agencies, Treasurer Jim Chalmers said.
Referencing Pauline Hanson and Liberal senator Andrew Bragg's criticism of compulsory super, he highlighted Moody's finding that Australia's fiscal strength was supported by the substantial private retirement savings held by superannuation funds.
"Labor built the superannuation system and we will always defend it," Dr Chalmers said.Â
"The Liberals, Nationals and One Nation want to destroy it and would undermine Australia's economic resilience as well as the secure retirement of Australian workers."
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