NSW Treasurer Daniel Mookhey issues grim warning ahead of June financial statement update

Residents have been warned of “tough decisions” as one state grapples with a “once in a generation cost of living crisis”.

NSW residents have been warned that tough decisions will need to be made, including cuts to government spending, as the state grapples with a “once in a generation cost of living crisis”.

NSW Treasurer Daniel Mookhey said he would be “candid with the people of NSW” when he delivers the June Economic Statement to parliament on Tuesday before he hands down the 2023-24 budget on September 19.

Speaking to reporters on Monday, he said the “situation is serious”, with the government dealing with $7bn of expenses and “hard to avoid pressures”.

Among these included $380m to renew contracts for 1100 nurses that are set to expire in 2024 and a $669m bill to NSW’s public sector insurance scheme icare.

“I am going to be upfront about the fact that the state’s finances are facing serious pressure,” Mr Mookhey said.

“As a result, this government is facing serious challenges and there are no easy decisions ahead.

“NSW has not experienced inflation with a seven in front of it since the 1970s.”

NSW Treasurer Daniel Mookhey has warned of ‘tough decisions’. Picture: NCA NewsWire/ Gaye Gerard

Treasurer lashes former wealth fund

On Monday, the Treasurer said he would be pausing payments to the former government’s NSW Generations Fund (NGF).

Initially, the scheme was set up with $10bn of government funds, including the $7bn sale of WestConnex. The Coalition government intended to borrow an additional $25.3bn by 2027 into the scheme’s Debt Retirement Fund (DRF) to help pay off future debt.

While the initial plan for the DRF was created when interest rates were less than 1 per cent, borrowing rates have now increased to about 4 per cent.

Mr Mookhey said the debt inaccurately inflated the budget, making it seem “healthier than it is”. The money in the funds also cannot be used on infrastructure projects or to pay public sector wages.

“We are in effect putting $25.3bn at risk so we can improve the state’s net debt position by just $2b,” he said.

“Swelling the size of the DRF with debt makes the budget look healthier than it needs.”

The government will further investigate the DRF prior to the September budget, with the fund referred to the upper house’s state development committee for review.

“It is the job of the parliament to shed light on this,” he said.

“It’s also the job of the parliament to reach a collective decision about whether or not this is a risk to the NSW balance sheet.”

Mr Mookhey has referred the DRF component of the NSW Generations Fund for review. Picture: NewsWire/ Monique Harmer

Could NSW lose triple-A credit rating

NSW’s economic position could hamper its two triple-A credit ratings and the state’s future borrowing ability.

When asked whether he was “worried” about losing the financial accolade, Mr Mookhey said it was “under immense pressure”.

NSW Premier Chris Minns said tough decisions needed to be made for the state to “pay our bills”.

“We have to take steps to ensure that we can pay our bills, that we’re in a strong economic position,” he said.

“It’s one of the leading reasons why we’re taking decisions about protecting taxpayer money and ensuring that to the extent possible, we live within our means.

“We can’t spend as if it’s a Covid year when it’s not a Covid year.”

While shadow treasurer Damien Tudehope conceded “some economic repair” was required coming out of Covid measures, he said cuts shouldn’t be made to cost of living measures.

On the NSW Generations Fund, Mr Tudehope said the opposition would hold the government to account and it shouldn’t suspend contributions.

“The suspension of contributions to the fund is like suspending contributions to our own superannuation funds. No one would do that,” he said.