2025 NSW budget: Building a future on guesses and gambles

NSW Treasurer Daniel Mookhey in Sydney on Tuesday. Picture: NewsWire/ Gaye Gerard

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I guess it was expecting too much for NSW Treasurer Daniel Mookhey to confer with his Queensland counterpart David Janetzki about possible budget dates. From my point of view, it was a tad inconvenient that the two budgets should be handed down on the same day.

Luckily, I have become something of a dab-hand at scanning budget papers, having been at the task for some time. What I have come to realise is that there are many subtle ways in which the figures can be manipulated to show the government’s fiscal approach in the best possible light.

This is particularly apparent in the case of the NSW budget. Over the forwards, it’s two years of deficits and two years of small surpluses. Gross debt is projected to reach $179bn by June 2026 and gross debt as a percentage of gross state product is projected to fall from a peak of 20.4 per cent in June 2027 to 19.6 per cent in June 2029.

But these quoted ratios are entirely assumption-driven. And that’s where some tweaking with the figures is possible. Take the assumptions on the growth of real gross state product – the equivalent of GDP.

According to the NSW Treasury, real GSP will be sluggish for the next two financial years, but will pick up in the two years after that. Real GSP is forecast to grow by 2¼ per cent in 2026-27, for instance. Nominal GSP is forecast to grow by 5 per cent in that year, which is important to the calculation of the ratio of government debt. These are just convenient guesses. The impression that the trajectory of government debt, which is still expected to rise, is not a worry because the ratio to state output is assumed to decline at some point is more useful political assumption than rigorous economics.

It enables Mookhey to talk about “the measured and responsible” approach to financial management. According to him, it “has enabled the government to make significant investments to rebuild essential services and support the long-term prosperity of the state”.

One of the most off-the-wall and potentially dangerous “investments” the government is embarking on is the $1bn to underwrite the construction of new apartment buildings. There is talk of 5000 new homes – not houses, mind you, just small apartments. It’s a case of state government turned part-time developer/apartment owner.

There are just so many pitfalls to this approach, including the fact that three-quarters of those who are currently locked out of the housing market prefer detached housing rather than apartments. There is also the potential for capital losses or very small capital gains for those who ultimately own these apartments, with the data very clear that the price gains are almost exclusively for detached houses.

Add in the possibility of defective buildings, financial calls on tenants, dubious and expensive body corporate arrangements and it’s not clear that the Minns government knows what’s it’s getting into. But the developers have clearly been able to buttonhole senior ministers and convince them that, if only the government is prepared to buy a tranche of off-the-plan apartments, all will be solved because project funding can be achieved. It’s a good deal for the lucky developers; pity the poor taxpayers.

Mookhey’s big hope is that the reform of the state’s beleaguered and financially unsustainable workers’ compensation scheme will eventually go through. This would yield some significant savings. But in the meantime, millions of dollars may be blown on over-budget, badly managed infrastructure projects. It could end up as six of one, half a dozen of the other.