The skyrocketing number of workers claiming psychological injury will help to push the NSW budget a further $2.5 billion into the red over the next five years, with the state predicting a 12 per cent surge in workers compensation liabilities by 2027.

In an attempt to offset the higher insurance bill, and repair a deficit approaching $7 billion, NSW Treasurer Daniel Mookhey is expected to unveil deep cuts to former government programs, as well as revenue raising initiatives including a tax on property developers who build projects near new infrastructure, in his first budget on Tuesday.