An ensemble of stochastic daily rainfall projections has been generated for 30 stations across south-eastern Australia using the downscaling nonhomogeneous hidden Markov model, which was driven by atmospheric predictors from four climate models for three IPCC emissions scenarios (A1B, A2, and B1) and for two periods (2046–2065 and 2081–2100). The results indicate that the annual rainfall is projected to decrease for both periods for all scenarios and climate models, with the exception of a few scenarios of no statistically significant changes. However, there is a seasonal difference: two downscaled GCMs consistently project a decline of summer rainfall, and two an increase. In contrast, all four downscaled GCMs show a decrease of winter rainfall. Because winter rainfall accounts for two-thirds of the annual rainfall and produces the majority of streamflow for this region, this decrease in winter rainfall would cause additional water availability concerns in the southern Murray–Darling basin, given that water shortage is already a critical problem in the region. In addition, the annual maximum daily rainfall is projected to intensify in the future, particularly by the end of the 21st century; the maximum length of consecutive dry days is projected to increase, and correspondingly, the maximum length of consecutive wet days is projected to decrease. These changes in daily sequencing, combined with fewer events of reduced amount, could lead to drier catchment soil profiles and further reduce runoff potential and, hence, also have streamflow and water availability implications. Copyright © 2012 John Wiley & Sons, Ltd.