NSW Budget Forecasts $2.3 Billion Deficit in 2026–27

However, NSW Treasurer Daniel Mookhey has predicted a return to surplus in the next three financial years.

New South Wales (NSW) Treasurer Daniel Mookhey delivers the NSW government post budget address to attendees at the Committee for Economic Development for Australia (CEDA) luncheon in Sydney, Australia on June 25, 2025. AAP Image/Dan Himbrechts

The New South Wales (NSW) budget, delivered on June 23, reveals the state government is projected to record a $2.3 billion (US$1.59 billion) deficit in 2026–27, more than double the figure forecast in the half-yearly update.

However, NSW Treasurer Daniel Mookhey has forecast a return to surplus, projecting it at $1.1 billion in 2027–28, rising to $1.8 billion in 2028–29 and $1.9 billion in 2029–30.

“New South Wales is not immune from global economic and fiscal headwinds that have increased short-term pressure on the budget result. However, the budget result has still been reduced from a deficit of $10.6 billion in 2022-23 to a deficit of $3.0 billion in 2025-26,” the budget paper (pdf) said.

“The state’s return to surplus is supported by the government’s commitment to keeping expense growth in check, which is projected to average 2.7 percent between 2025-26 and 2029-30 (down from an average of 9.7 percent between 2018-19 and 2022-23).”

Key Areas of Government Spending

The NSW government is expected to set aside $116.7 billion for the state’s four-year infrastructure program, aimed at replacing ageing assets, providing the power and water connections needed for new homes, and delivering essential infrastructure such as schools and hospitals.

The budget also includes $11.9 billion for health infrastructure, including the construction of a new hospital at Rouse Hill in Western Sydney and the redevelopment of Bankstown Hospital.

Another $400 million will be spent over four years on maintaining and repairing existing hospitals—many of which are struggling to cope with record patient numbers—after a review found serious problems including leaking roofs, pigeon infestations, mould, and faulty lifts.

Nurses and midwives will get a collective $2.9 billion pay rise after the Industrial Relations Commission ordered it earlier this year, lifting salaries by between 16 and 28 percent over three years. Another $10.3 billion will be spent over the next four years to recruit an additional 9,000 health workers.

The budget also allocates $9.2 billion to build and upgrade more than 260 schools, including $4.1 billion to be spent in Western Sydney, providing capacity for 30,000 additional students. New high schools will also be built in Austral and Bella Vista, and $2.3 billion will go toward building and upgrading schools in regional areas.

The government will spend $32 million over four years to modernise the building approvals system and speed up the deployment of modular housing, with a new modular housing factory to be created in partnership with business.

There is also an initial $31 million to support the delivery of 8,500 new homes in the Bays West precinct, along with $52 million to establish the Development Coordination Authority, which is intended to streamline planning decisions across government agencies and help the state meet its target of 377,000 new homes by July 2029.

A further $450 million is allocated for build-to-rent dwellings for essential workers.

Public transport will also receive a boost, with $6.5 billion allocated over 10 years for thousands of new electric buses and upgraded depots to support them. In addition, $2.1 billion will be spent on maintaining and improving the reliability of the Sydney Trains network.

Opal fares will be frozen at 2025 levels for the year, and frustrated commuters will be dealt with by a new passenger care and support team.

The reduced fares form part of what the treasurer has described as a transport affordability package.

It also includes relief for private vehicle owners, with registration fees to be cut by $100—worth $435.1 million across 4.4 million vehicles—as well as an $80 reduction for motorcycles. The weekly toll cap will also be lowered from $60 to $50, although both measures will apply only in 2026–27.

Support for Jewish Community

Six months on from the Bondi Beach terror attack, the budget includes $8.3 million in support for the Jewish and Bondi communities.

Waverley Council will get $2 million to help install a permanent memorial, while another $2 million will go toward community forums, school-based support, and trauma-informed programs.

The Jewish Board of Deputies will receive a $1 million grant to provide additional community support, and $500,000 will be allocated over the next six months for the Community Security Group’s 24-hour security operations centre.

The package also includes $2.6 million for the Sydney Jewish Museum to create more modern anti-Semitism exhibitions.

The state’s firearms registry will receive nearly $42.8 million to strengthen checks and licence processing, while NSW Police will receive $94.3 million to create a specialised armed response command with a 24/7 operations centre and rapid response vehicles.

The state’s finances are almost $12 billion worse off over the forward estimates due to the way GST has been reallocated—a perennial source of friction between NSW and the federal government. This year, NSW received $1.4 billion less GST revenue than neighbouring Victoria, despite having 1.5 million more residents.

NSW has also been hit by three Reserve Bank interest rate rises since early 2026, leading to an $8.4 billion deterioration in property-related tax revenues.