The inflation dragon has taken a nine-figure bite out of the NSW budget as the treasurer tries to reassure families they'll keep getting help with rising costs.
Treasurer Daniel Mookhey unveiled a bleak picture of the state's finances on Tuesday, airing concern for the state's remaining two AAA credit ratings and a pressing need to rein in spending.
Inflation has also severely increased the depreciation costs of roads, schools and added hundreds of millions of dollars each year to budget deficits.
Families were doing it tough after 12 interest rate rises in 14 months, and the common good demanded the government did their fair share, Mr Mookhey said.
"Just as it's our responsibility to stimulate the economy when it's slowing down, it's out job to moderate our demand if we risk making inflationary pressures worse," he said in an economic update on Tuesday.
The treasurer declined to outline where cuts would be made but said he would target areas that did not impact families.
"That is the right way for the government to approach it," he told reporters before his speech.
"After 12 years of the previous government, there is waste and savings to be made.
"We will save as much money as we can from within the government in forms that do not affect families so families get support where it's affordable and deliverable."
However, election promises will not be broken, ensuring energy bill relief, a 4.5 per cent public sector pay rise and a $60 weekly toll cap will be delivered.
The opposition demanded NSW focus on delivering cost-of-living relief for families, saying inflation was largely a matter for the federal government.
The coalition has also played down the scale of NSW's debt, which was last projected to reach 14 per cent of the state's economy in 2026 - compared to 26.5 per cent in Victoria.
The Minns government has promised to keep state debt under the $187 billion forecast for 2025/26.
"The government is softening us up for what could be very severe cuts because they have lost control of their own budget," Opposition Leader Mark Speakman said on Tuesday.
"The only thing that has changed since March is this government has lost control of their budget because they can't fund their public sector wage increases."
The spectre of a per-capita recession also remains a live issue for NSW.
Westpac and ANZ economists this week forecast the nation as a whole would likely enter such a recession - two quarters of negative growth in gross domestic product per person. Treasury in March predicted nearly all of the state economic growth in 2023/24 would be swallowed by population growth.
Asked if he expected a recession in NSW, Mr Mookhey said the state was facing "very tough economic circumstances ahead".
Mr Mookhey dismissed suggestions a solution for NSW was to increase coal royalties, as Queensland did before posting a surplus of more than $12 billion last week.
Thermal coal was predominant in NSW, meaning any royalty increase would be felt by working families through electricity bills, he said.
The state budget is due to be delivered on September 19.
