Daniel Mookhey raids emergency fund to pay for new spending

Treasurer Daniel Mookhey has raided $6.7bn from a fund to cover emergencies, while warning ongoing ‘volatility’ could blow the budget’s bottom line.

The Minns government has tipped more than $6.7bn set aside to cover “anticipated risks and cost pressures” into new spending measures, despite Tuesday’s budget warning that global tensions could blow the bottom line.

The Coalition has now accused Treasurer Daniel Mookhey of raiding a rainy-day fund designed to cover emergencies to prop up a “flimsy surplus”.

Next financial year, the government has shifted $1.4bn from the “central provision” fund to cover new spending.

The budget papers say the central provision that was “established in prior periods for anticipated risks and cost pressures … has been unwound to offset new expense measures”.

Compared with December’s budget update, the government has booked an extra $5bn of new spending in 2025-26 alone.

Treasurer Daniel Mookhey and Finance Minister Courtney Houssos. Picture: Rohan Kelly

Over the forward estimates, $6.7bn has been shifted into new expenses.

The government on Friday insisted the “central provision” was created to fund future government expenditure, and was being “unwound” as spending decisions were made.

Mr Mookhey has ‘unwound’ a government fund designed to cover risks and cost pressures. Picture: NewsWire/Gaye Gerard

The budget estimates that the government will spend almost $12.9bn in “new expenses” over the forward estimates compared to the half-year review, a figure which accounts for a “tendency” for expenses to “increase” due to various technical reasons.

The new spending that is being “offset” by the unwound contingency fund includes $1.2bn to fix the foster care system, $836 million for better healthcare services, more money for public schools and TAFE, and cash for flood recovery.

New spending since the half-year review also includes $370 million for bus service improvements, $650 million for domestic violence prevention, and $200 million for Closing the Gap measures.

It comes despite Mr Mookhey declaring he is “cautious” about the government’s books, which forecast a $1.1bn surplus in 2027-28.

NSW Shadow Treasurer Damien Tudehope. Picture: NewsWire/Nikki Short

“There’s a lot of volatility right now, in the global economy and our region as well,” he said on Tuesday, declaring “a lot needs to go right” for the budget to return to a projected surplus in 2027-28.

The budget warns that “recent events have made the global environment more challenging for the NSW economy,” singling out US President Donald Trump’s trade tariffs as a potential risk.

Opposition Treasurer Damien Tudehope said: “The government’s own Budget papers warn of risks to the Budget position and yet the government has done away with the funding that would allow them to deal with these risks.

“It is clear that they have cheated the people of NSW of necessary funding to be able to respond to natural disasters – all to be able to produce a flimsy surplus.

“Their fictional forecast has only been achieved by doing away with any capacity to respond to global pressures, natural disasters or unanticipated risks.”

Mr Mookhey unveiled his third budget on Tuesday. Photo: NewsWire/Gaye Gerard

Mr Mookhey insisted the central provision had not been set aside for financial emergencies, and was being used for its intended purpose.

“The government has previously made provision for anticipated costs, like the Essential Services Fund which was established in 2023 to fund wage rises for essential workers,” he said.
“We also set aside money in previous budgets to deal with the $7.8bn worth of programs the Coalition left unfunded when they lost office.

“As we’ve filled the Coalition’s fiscal holes, we’ve unwound this provision.

“This prudent approach to budget management removes volatility from – and adds credibility to – the forward estimates.

“Mr Tudehope should have done the same when he was the State’s Finance Minister.”

Originally published as Daniel Mookhey raids emergency fund to pay for new spending