With historic debt putting pressure on the NSW budget, Treasurer Daniel Mookhey is preparing to deliver an economic statement on the state’s finances.
After coming to office in March, Labor announced the 2023/24 budget would be delayed by three months until September, to allow the government to consider its options.
With high inflation, rising interest rates and the state’s historic debt, the treasurer has warned tough decisions are required ahead of the budget.
Mr Mookhey will deliver his statement to parliament on Tuesday, with reports he will warn the state’s AAA credit ratings are at risk.
He has also flagged moves to ensure the budget provides a more transparent picture of the state’s finances.
The major Debt Retirement Fund (DRF) created by the former Liberal-National government would be reviewed, with the treasurer saying it may no longer serve the best interests of NSW.
Mr Mookhey will announce in his economic statement that the current method of reporting the Debt Retirement Fund’s (DRF) impact on the budget result will be referred to the Legislative Council’s State Development Committee to review.
Mr Mookhey will describe the former government’s plan to raise more than $25.3 billion of debt by 2027 to deposit into the DRF, taking the fund’s balance to $50.8b, as not being a fit-for-purpose approach.
The 2023 pre-election budget update showed a $328 million surplus for 2024-25, which would have been a $911m deficit without the DRF’s returns.
The government will in future include a budget result that excludes the DRF’s net investment returns.
Excluding these returns, which can only be used to retire debt, will show more clearly the state’s available resources to fund services and infrastructure, Mr Mookey said.
The fund was created when NSW was in surplus and interest rates were low, he said on Monday.
“But now, at end June 2023, the state is forecast to be $12b in deficit, with debt expected to reach $187.5b by 2026 and interest payments skyrocketing.
“The former government’s strategy of growing the DRF will be revisited,” he said.
“We will address the fact the previous government had been planning to wield the state’s credit card to play around in financial markets.”
Revenue from state-owned corporations and royalties that the former government had budgeted to contribute to the DRF, could be redirected instead to help fund essential services.
“The DRF will be referred to the State Development Committee so that we can fully assess how to manage our exposure to risk and reduce our interest payments.”
– AAP
