It wouldn’t be a pre-election Budget without a $561.4 million cost-of-living package, a forecast return to surplus, and $1 billion for “general risks and contingencies” (code for upcoming voter handouts).

The cost-of-living relief is focused on transport, including a $100 discount on vehicle registration, a $10 lowering of the weekly toll cap, and a freeze on Opal fares at 2025 prices.

Despite the $1.1 billion budget surplus forecast for next year, a $2.3 billion deficit is expected in 2026-27. This will make it eight budget deficits in a row since the COVID-19 pandemic; the longest period the State has been in the red in the modern era.

The Budget weighs immediate household relief against a longer fiscal repair task with a property tax shortfall, with the Budget revealing that the RBA’s rate rises have led to an “$8.4 billion deterioration in the State’s property taxation revenues” – a reminder of how much sits beyond the Treasurer's control.

The State Election is just 263 days away. Handing down the Budget, Treasurer Mookhey spoke optimistically, perhaps hinting at the message Premier Chris Minns will take to the polls:

“Governments’ role is not to replace the efforts of our citizens, it is to empower them, to build the roads, railways, and energy systems that allow them to flourish”.

Economic Outlook

The very first sentence of the first section in Budget Paper One describes “global conflict and rising inflationary pressures have created a more challenging environment for the economic and fiscal outlook”. This neatly summarises the story Treasurer Mookhey is telling in this year’s Budget.

The Budget delivers a deficit of $2.3 billion in 2026-27, however NSW is on a pathway to balancing the books, with a surplus of $1.1 billion forecast in 2027-28.

Gross debt is expected to hit $194.8 billion in 2026-27 and, whilst it continues to rise, it peaks as a percentage of Gross State Product in 2027-28 at 20.7%, and will stabilise at 20.5% over the forward estimates.

NSW Treasury forecasts the state’s economy to grow at just 1% both this year and next, a halving of the growth forecast just six months ago in the half yearly review.

The Sydney Consumer Price Index is forecast to be 3.75% this year, and will then stabilise at 2.5% over the forward estimates.

The unemployment rate is expected to stay constant, between 4.5% and 4.75% over the forward estimates.

The Budget papers model the impact of a further escalation in the Middle East conflict, resulting in crude oil prices spiking at US$180 per barrel. This would result domestic retail petrol prices peaking in April next year at $3.38 per litre, while the average quarterly retail diesel price peaks at $4.28 per litre.

Major Announcements

Cost of Living

• A $435 million transport affordability package which includes a $100 reduction in car registration for private vehicles and $80 for motorcycles for one year, and the weekly toll cap will be reduced from $60 to $50, with toll administration fees also eliminated.
• Under a $557 million program, households earning less than $210,000 per year will be eligible for zero-interest loans of up to $15,000 over ten years to fund energy upgrades including solar, batteries, insulation, reverse-cycle air conditioning, ceiling fans and switchboard upgrades.

Health

• $10.3 billion over four years for health, including the recruitment of an additional 9,000 health workers.
• Nurses will receive a $2.9 billion pay rise ordered by the NSW Industrial Relations Commission.
• $112.3 million has been allocated to mental health, including four years of confirmed funding for Lifeline and services delivered under the national mental health and suicide prevention agreement.
• $631.9 million will fund foundational supports for people with disability who are not on the NDIS, including children with mild to moderate autism through the Thriving Kids program.
• $35.7 million will fund a pilot program to transition approximately 700 elderly patients from hospital beds into permanent care.

Housing

• Changes to the presale finance guarantee will allow the NSW Government to underwrite 100 per cent of affordable housing projects built by community housing providers and 75 per cent of homes in projects with fewer than 20 dwellings, both capped at $30 million per project.
• $32.3 million has been allocated to modernise the building approvals system to facilitate modern methods of construction, including prefabrication and modular building.

Transport

• $6.5 billion program over 10 years to deliver thousands of new domestically built electric buses, and new electric bus depots.
• The rail maintenance budget will reach a record $2.1 billion, including an additional $200 million for network maintenance compared to last year, and $150 million over four years for upgrades to the rail operations centre.
• An additional $300 million, matched dollar-for-dollar by the Commonwealth, will fast-track upgrades to Elizabeth Drive and Fifteenth Avenue near Western Sydney International Airport.

Community, Crime and Safety

• $184 million over the next four years for six frontline domestic and family violence programs.
• $126.2 million has been allocated to law enforcement, including $108.8 million for technology upgrades across NSW Police and $17.4 million for the NSW Crime Commission to disrupt organised crime networks and confiscate illegal and unexplained wealth.
• $8.3 million has been allocated to support the Jewish community following the December 2025 Bondi terror attack, including $2 million for a permanent memorial honouring the victims of the Bondi shootings, $1 million for the Jewish Board of Deputies, and $2.6 million for the Sydney Jewish Museum.

Reactions

Leader of the Opposition, Kellie Sloane MP

“The Treasurer was spruiking this as a Budget of relief and reform. But the relief is temporary and the reform, it’s just missing”.

Business NSW CEO, Daniel Hunter

“Today’s NSW budget, while fiscally responsible, has missed an opportunity to boost business confidence…”

Unions NSW Secretary, Mark Morey

“We are seeing the dividend of a government that understands the value of essential workers… Real prosperity comes from the ground up, not from the top down, and that is something this government, the Premier and the Treasurer instinctively understand.”

Property Council of NSW Executive Director, Kate Stevenson

“In a challenging economic environment, the certainty offered by this Budget is very welcome… Importantly, there are no new taxes or charges hitting the property sector, and that provides confidence for investors and developers making long-term decisions.”

Australian Medical Association

“Today’s Budget is not all it seems. Health funding has gone backwards in real terms despite record activity. That is a disaster for patients.”

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