NSW Budget: Treasurer Daniel Mookhey cuts $10 billion in government debt

Labor will continue to show spending restraint in its third budget, Treasurer Daniel Mookhey says, saving NSW $400 million in interest payments every year.

Gross government debt will be almost $10 billion lower in June next year than forecast before Labor took office, with Treasurer Daniel Mookhey prioritising budget repair over new sweeteners to help families struggling with the cost of living crisis.

On Tuesday, Mr Mookhey’s third budget will forecast NSW’s gross debt to hit $178.8bn in June 2026, $9.4bn lower than predicted before the election.

That will save $400 million in interest payments every year, with the Treasurer declaring that money can be used for essential services instead.

Gross debt for 2025-26 is predicted to be $700 million lower than forecast in the last budget update six months ago.

Mr Mookhey is expected to hand down another bare-bones budget on Tuesday, prioritising paying down debt over delivering cost of living relief.

However, Mr Mookhey has previously flagged that Tuesday’s budget update could include more measures to intervene in the housing market.

A range of budget measures announced so far have been targeted at tackling the housing crisis. They include offering thousands of free construction training placements, extending tax breaks for investors in build-to-rent developments, and allowing developers to build public infrastructure themselves to get their projects off the ground.

The Minns government has also pledged $18 million for a new “Authority” to fast-track new major projects.

NSW Treasurer Daniel Mookhey in his office at Parliament House ahead of Tuesday's delivery of the NSW Budget. Picture: NewsWire / John Appleyard

When he delivers his budget on Tuesday, Mr Mookhey will say that the Minns government has “stabilised” the state’s debt, avoiding hundreds of millions of dollars in interest payments.

“Almost $10 billion of Coalition debt has been avoided,” he will say.

“By avoiding this debt, we save more than $400 million in interest payments each and

every year.

Treasurer Daniel Mookhey revealed thousands of free TAFE places will be in Tuesday’s budget. Picture: NewsWire / Monique Harmer

“This is $400 million that is helping secure the future of our essential services.”

In a pre-budget interview, Mr Mookhey told The Daily Telegraph that NSW is “on track” to have “among the lowest levels of gross and net debt as a percentage of the state economy in the country”.

However, the government’s debt bill will be increasing in “absolute terms,” he said.

Premier Chris Minns, CEO Business NSW Daniel Hunter and Treasurer Daniel Mookhey during a panel discussion at the NSW Economic review breakfast at the Shangri la Hotel in Sydney. Photo: NewsWire/ Gaye Gerard

December’s Half Year Review forecast gross debt to peak at $199.9bn in 2027-28, and is expected to peak at an even higher number in this year’s budget.

The most recent budget update, released in December, forecasts deficits across the forward estimates. The Half Year Review predicted NSW would be almost $5bn in the red this financial year.

The Treasurer has repeatedly stressed that he will continue to show spending restraint when handing down his third budget.

Tuesday’s budget will be Mr Mookhey’s third. Picture: NewsWire / John Appleyard

He told the Telegraph that people should not expect a “massive rise in spending”.

On Monday, the Coalition accused the Minns government of over-promising and underdelivering.

Liberal Treasury spokesman Damien Tudehope called for the government to be offering more cost of living relief.

“Where is there anything in the announcements which have been made to date which benefit families or which give relief for cost of living issues?” he said.

Mr Mookhey has said Tuesday’s budget will be focused on “the future of our essential services and the future of our economic growth”.

Originally published as NSW Budget: Treasurer Daniel Mookhey cuts $10 billion in government debt