NSW Treasurer Daniel Mookhey flags a budget ‘for the long term’

Tuesday’s NSW budget is likely to be the antithesis of the government’s Queensland stablemates: light on handouts but serious on economic stability.

NSW Treasurer Daniel Mookhey. Picture: John Feder

Tuesday’s NSW budget – Treasurer Daniel Mookhey’s second in nine months – is likely to be the ­antithesis of that handed down by his Labor counterpart in Queensland this week: it will be light on handouts and heavy on long-term economic stability.

Mr Mookhey, who wouldn’t be drawn into contrasting his budget with what will likely be Queensland Treasurer Cameron Dick’s last, told The Australian Tuesday’s package would “focus on the fundamentals of the economy”.

“I’m determined to make sure we’re not adding to any inflationary pressures and that we are doing our job to make sure that ­interest rates can come down as quickly as possible,” he said.

The Treasurer, who declined to comment on or follow Queensland’s call for the RBA to cut interest rates, said the budget itself would look to ease that pressure.

“It (high interest rates) has a particular impact on the NSW economy because the mortgages are bigger, so we are seeing more of a consumer pullback,” Mr Mookhey said. “It’s right and appropriate for this part of the economic cycle that we are very careful about each dollar we spend.”

Mr Mookhey assumed responsibility for a public purse that, he said, included the largest debt any incoming government had inherited. His room for manoeuvre, to his chagrin, had also been hit by what he has called the “great GST rip-off”.

“It has been the biggest change in the state’s finances between the first and second budgets, which were only nine months apart,” he said.

The GST carve-up will cost the state budget $11.9bn over four years, plunging NSW into deficit for the foreseeable future.

Origin Energy and the NSW government brokered a deal to extend Eraring power station’s life by two years. Picture: Richard Dobson

“People will see on budget day how the state’s finances would have looked if we simply kept our GST share from the current financial year to the next,” Mr Mookhey said, adding it had forced the ­budget to “absorb” the impact.

“But I prefer that rather than having to slug families or businesses with $11.9bn through either service cuts or other policy changes.”

The Queensland government has called Mr Mookhey’s proposal on how best to overhaul GST “unfair”. The NSW Treasurer called the existing system “absurd”.

“We would all be a lot better if we were to shift the entire system to a per capita allocation, which would avoid these types of contests between the states,” he said.

Last year, the NSW government found $13bn in savings, but the “$11.9bn GST rip-off”, the Treasurer said, had sent the state “back to square one” and likely put its AAA credit rating at risk.

Mr Mookhey said Canberra had been listening to the NSW government about contributing more to the state’s infrastructure projects. “But we need to see a lot more, because we are taking on the bulk of the nation’s population growth,” he said.

There is significant investment, however, in Tuesday’s budget. Construction on the second stage of the Parramatta Light Rail will begin before the next election, costing $2bn, while $1bn will be spent on upgrading and creating roads around the new Western Sydney Airport precinct.

The life of the state’s 55 Tan­gara trains will be extended by 12 years, costing $447m, while there’s a further $840m for hospital upgrades, bringing the total health infrastructure spend to $3.4bn in the next financial year.

In May, the government and Origin Energy brokered a deal to extend the Eraring coal-fired power station to mid-2027, with the former potentially paying up to $450m if the plant runs at a loss under a potential underwriting agreement.

Mr Mookhey called it the best deal possible for the taxpayer.

“We got the balance right … between making sure people have power, that we aren’t exposing businesses or families to short, sharp, precipitous rises in power prices, but that we’re speeding up the renewables transition,” he said.

Rather than handouts, Mr Mookhey said, long-term budgets were the way forward for the state.

“We’re determined to build a long-term Labor government and we think the best way to do that is to govern well.”