Daniel Mookhey styled himself as a financial Mr Fix-It: This is what you can expect in his first budget

The trade union lawyer-turned-NSW Treasurer Daniel Mookhey has long been at home in Macquarie Street wearing a hoodie and jeans. His trademark coloured glasses completed the look – he has nine pairs with interchangeable parts. Only when necessary – such as parliamentary sitting days – did Mookhey don a suit, although even then he teamed it with bold patterned shirts and mismatched ties.

His sartorial styling, however, has adapted now that he is in government. When the Herald sits down with Mookhey in his Parliament House office this week ahead of his first budget on Tuesday, the 40-year-old father of two is in a sharp navy suit and sensible tie. He is almost a carbon cutout of his Liberal predecessors, former treasurers Dominic Perrottet and Matt Kean.

Treasurer Daniel Mookhey in his office ahead of his first budget.Credit: James Brickwood

Except Mookhey could not be more different. A son of Indian immigrants from Punjab, he was the first Australian minister to be sworn in on the Bhagavad Gita, an ancient Hindu scripture. His parents were founding members of the first Hindu temple in Australia, Sri Mandir in Auburn, and he is a product of public education in Sydney’s western suburbs.

And now as treasurer, Mookhey has styled himself as a financial Mr Fix-It, cleaning up after Perrottet and Kean. He repeatedly talks of “tough decisions” and getting the budget back under control. “The simple way of putting it is we are fixing the state’s finances, so we can rebuild the state’s essential services,” he says.

Mookhey claims the previous government “unleashed $27 billion worth of spending” during its final nine months in office, putting extreme pressure on the budget. But the state’s financial problems go back much further.

In 2019-20 the fallout from the black summer bushfires followed by the outbreak of COVID-19 ended a long run of budget surpluses for NSW. As COVID restrictions dragged on, revenues slumped and costs soared as the government responded to the health crisis and attempted to prop up the state’s businesses and households.

The effects of global pandemic pushed the economy into recession for the first time in decades.

In 2021-22, NSW registered a historic deficit of nearly $17 billion. The devastating floods last year dealt another blow to the state’s coffers – the cost of relief and rehabilitation drove some of the spending in the final months of the Perrottet government that Mookhey now complains about.

Yet another big budget shortfall – around $7 billion – is forecast this financial year; it will be the state’s fifth straight deficit. And now economic storm clouds are gathering again. The recent surge in inflation and 12 interest rates increases by the Reserve Bank since May 2022 are taking a growing toll.

Mookhey says higher interest rates have “absolutely hurt household spending and is leading to a moderation in economic growth”.

Business confidence across the state is low, and many households are grappling with cost of living pressures.

Unemployment in NSW is also starting to rise. Figures released on Thursday showed the state’s jobless rate climbed to 3.6 per cent in August, the highest in 15 months. The number of unemployed people in NSW has jumped by 30,000 since June.

A survey released this month by Business NSW, a peak body, found almost a quarter of NSW firms planned to cut staff in the coming quarter. There are also doubts about the global outlook, especially the Chinese economy due to ongoing stresses in its property market. A budget update in February warned of economic “headwinds and uncertainty” for NSW.

Since becoming treasurer in April Mookhey has argued the NSW government has a role in addressing what he calls “the once-in-a-generation cost of living crisis” by bringing spending under control to help curb inflation.

Even so, his first budget will include some support to help ease financial pressures on families. “I’m conscious of the fact that the people who are paying the biggest price to tame inflation tend to be those with the least,” he says.

While Mookhey talks of spending restraint, his first budget must also include a credible strategy to fund Labor’s key election promise to boost public sector wages. It is a formidable task for Mookhey given the state’s wages and superannuation bill is forecast to cost nearly $50 billion this year.

“We have delivered the biggest pay rise the NSW public service has gotten in more than a decade; we have a mandate to do that,” he says. “We were clear in the election about the way in which we would be paying for this … through system changes that redirect and reallocates resources.”

The wages policy is likely to be the one that attracts the most scrutiny in Mookhey’s first budget, particularly from the opposition, which is adamant that Labor cannot afford the promised pay rises for frontline workers. Former Coalition ministers have been working behind the scenes with Opposition Leader Mark Speakman to ensure they are ready to pull apart Labor’s strategy in the budget reply speech.

But it’s not all about wages. Mookhey must also deal with a deteriorating debt position.

Before the pandemic, NSW’s net debt was very low, but it has been rising quickly since. One driver has been the additional costs of the COVID-19 response. The other has been borrowings needed to fund the state’s ambitious infrastructure program scheduled to cost $116 billion over the four years to June 2026. By that time net debt is forecast to be 14 per cent of the state’s annual economic output – far higher than at any time in the past three decades.

Despite rising debt and a run of big deficits the NSW government has retained its coveted triple-A credit rating with two international ratings agencies. But Mookhey acknowledges that that could be downgraded. “I’m certainly not going to hide the fact that the state’s remaining triple-A credit ratings are under pressure,” he says.

Meanwhile, the cost of servicing debt has increased sharply thanks to the recent spike in global interest rates.

Mookhey points out that interest repayments have been growing faster than any other area of state spending and that the government’s annual interest bill will soon be more than what it costs to run the NSW Police Force.

Labor has announced several changes it claims will significantly reduce net debt including an overhaul of the scandal-ridden Transport Asset Holding Entity (TAHE), which manages the state’s rail assets, and the suspension of payments to the Perrottet government’s NSW Generations Fund (NGF), set up to fund community projects and retire debt.

Mookhey is confident the state’s gross borrowings will remain within the $187 billion peak currently forecast in June 2026.

When Mookhey was elected to parliament, he quickly developed a reputation as a policy wonk and his rise from backbencher to Treasurer has been rapid. During the interview with the Herald, he reels off an array of budget figures and talks with confidence about the intricacies of state finances.

Daniel Mookhey being sworn in as treasurer on the Bhagavad Gita, a Hindu holy book.Credit: Dion Georgopoulos

So, what has he found surprising or unexpected since becoming Treasurer? “I’m genuinely surprised how many people turn up to my events,” he says. “That’s a definite change to being shadow treasurer. Also, you meet some really interesting people.”

Giants of American politics dominate the decorations in his parliament office; a picture of civil rights activists Martin Luther King and Malcolm X hangs behind his desk. Nearby are campaign posters of former US presidents John F. Kennedy and Richard Nixon he found at a flea market.

Mookhey entered the upper house in 2015, filling a casual vacancy following the retirement of one-time resources minister Steven Whan (who was wooed back to state politics in March and is now the MP for Monaro).

In a speech to the Fabian Society soon after becoming an MP, Mookhey called for the ALP to reinvest its intellectual energy into the state level of government and to see it as a “laboratory of political and policy reform” which could then inform reformist federal Labor administrations. He also argued that new institutions were needed to help guide people through the world of work, particularly in the freelance sector of professional service.

Mookhey cut his teeth as an MP on a range of parliamentary committees before being elevated to Labor’s frontbench after the 2019 election. First, Mookhey was finance shadow minister then, after Chris Minns replaced Jodi McKay as leader, he was promoted to treasury spokesman.

However, it was his role on upper house committees and during budget estimates that established Mookhey as one of Labor’s most effective team members. He helped uncover the woeful standards of the state insurer icare, and he also unravelled the government’s complex TAHE, which he describes as a multibillion-dollar accounting trick to inflate the budget. Mookhey also led the charge on the John Barilaro trade scandal as a key committee member during the inquiry into the former deputy premier’s brief appointment to a plum New York trade role.

Now as Treasurer, Mookhey is framing his first budget as one that redirects resources to basic services while keeping a lid on spending and debt. He singles out three main priorities. “You can expect this budget to help families with the cost of living, it will help fix our essential services and will help get the state’s finances back under control,” he says.

That will include steps aiming to boost housing supply and put downward pressure on rents. “We are seeing immense pressures on all parts of the housing market but renters especially,” Mookhey says.

He also flagged broader housing reforms to be rolled out beyond the budget. The government is investigating what effects short-term housing rentals, such as Airbnb are having on the state’s long-term rental market as interest rates rise.

“I’m certainly paying attention to whether mum and dad landlords are managing higher interest rates by effectively withdrawing the stock from long-term rentals … then putting it into short-term rentals,” Mookhey says. “We’re not going to trigger a government policy response until we’re confident about what’s going on, but we’re paying close attention to it.”

Mookhey wants to make it clear that tough decisions have been made. “We’ve had to make some difficult choices about what the state must have as opposed to what the state could have,” he says.

Despite the biggest day in Mookhey’s political career looming, the Treasurer shows no signs of nerves around delivering his first budget on Tuesday. He may look the part in his suit, but at the end of the Herald’s interview, Mookhey reveals he has not lost his cool. Asked if he would do a TikTok, a slightly anxious media minder apologises to the Treasurer for not pre-warning him. Mookhey is not in the least fazed and delivers a pithy summary of the budget for the smartphone.

He may have preferred to be decked out in his jeans and hoodie, but he seems as comfortable doing a TikTok as crunching the budget numbers.

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