The NSW auditor-general has been notified following the discovery of a $1 billion hole in the state's books, days ahead of the government releasing its second budget.
Development sales at Sydney Metro stations were counted twice, meaning the state's projected net debt would be about $1bn more in the coming years than projected before the 2023 election.
The identified error adds to economic headwinds in NSW ahead of the state budget on June 18, Treasurer Daniel Mookhey said.
"This is a material error that has real consequences for the budget."
"I've written to the auditor-general to notify him about this historical error in the state's accounts," he said.
Mr Mookhey informed the auditor-general the Metro City and Southwest project, expected to begin service later this year, duplicated asset sale proceeds for developments at stations, the Sydney Morning Herald reported on Saturday.
Emergency Services Minister Jihad Dib said it was a concerning discovery.
"We know that the budget is in a really difficult position, we know the challenges that the state of NSW faces," he told reporters on Saturday.
"This was an accounting error that we were not aware of," Mr Dib said.
The state's budget is expected to become further tightened by the recently announced distribution of goods and services tax to states and territories, which leaves NSW almost $2bn less than projected.
Premier Chris Minns has called for a per-capita GST carve-up, while Mr Mookhey has warned Australia's most populous state risks losing its AAA credit rating.
