Treasurer Daniel Mookhey delivers pre-election spending plan
Click for the live explanation of the 2026 state budget.
The Minns government will offer a $100 discount on car registrations and a cap on Opal fees ahead of elections in March as part of a $561.4 million cost-of-living relief package that forms the centerpiece of a low-key budget that maintains the state’s record of spending restraint by adhering to forecasts of a weak surplus in 2028.
The government will also spend an additional $184.1 million on domestic violence prevention; This is a record 50 percent funding boost for a sector that has long called for significant cash injections.
It has also set aside $6.4 billion over a decade to electrify the state’s 8000-strong bus fleet and encourage manufacturers to build them in NSW.
The budget reveals the government has recorded a $3 billion deficit in 2025-26; That’s a $102 million improvement over what was predicted in December’s mid-year budget update.
However, a deficit of $2.3 billion is expected in 2026-27; That’s up from the $1.1 billion estimated in December’s semi-annual update.
The government is still forecasting a $1.1 billion surplus in 2028, despite Finance Minister Daniel Mookhey warning ahead of the budget that the combined effects of war in the Middle East, inflationary pressures and rising interest rates are putting huge pressure on its budget.
This is partly a result of the government limiting the cost of living package to one year, as well as “global economic and fiscal headwinds” putting short-term pressure on the economy.
After years of complaints from NSW about cuts to GST revenue, this helped Mookhey maintain his surplus forecasts, with the Treasury predicting it would receive an extra $5.6 billion from the Commonwealth Grants Commission over the next four years.
One of the most significant announcements in the budget was an increase of $184.1 million in domestic violence funding, which will be distributed across a variety of programs. In his budget speech, Mookhey said the funding was the “largest increase” in the sector in the state’s history.
He said the funding was a recognition that the industry “deserves better”.
“So we will do better to combat the scourge of domestic violence and domestic violence,” he said.
The $561.4 million transportation cost-of-living package, which included reducing the weekly toll from $60 to $50, eliminating toll administration fees and maintaining Opal prices at 2025 levels, was an acknowledgment that “families are feeling the shock of the global oil crisis” and are paying more for fuel.
“It is true that the price of oil is determined far from here, but the registration price of a vehicle is decided here,” Mookhey said in his budget speech.
The government was keen to improve its record on spending restraint when creating the budget; The spending increase was the lowest of any Australian jurisdiction in the last three years and the lowest increase in three years of any NSW government since comparable records began in 1997. The budget boasts of keeping spending growth at an average of 2.7 percent over the next four years.
But the government’s return to surplus will depend on the impact of inflation on the economy reducing quickly, and Mookhey acknowledged “a lot of things have to go right” for NSW to reach surplus.
The government predicts inflation will ease from 2027 as “temporary shocks” subside, and the Treasury predicts this will allow interest rates to “normalise”. This means that although the government predicted an $8.4 billion reduction in stamp duty and land tax over four years, most of the damage was predicted in the early years.
But the Treasury Department promoted uncertainty, modeling a series of worst-case scenarios for the economy, including where the conflict would escalate. It was assumed that if this were to happen, prices would remain at high levels until the end of the year, with domestic retail gasoline prices peaking at $3.38 per liter in April next year, and the average three-month retail diesel price peaking at $4.28 per liter.
It is estimated that housing investments will decrease by 3.75 percent in 2027-28 following the decline in economic activity, while housing prices will continue to decline.
Revenue losses from stamp duty and land tax cuts were partly offset by increases elsewhere.
Mookhey highlighted the performance of the government’s investment umbrella OneFund, a pool of investment funds established in 2024; this outperformed forecasts, generating $4.6 billion in returns last year.
Largely as a result, revenue forecasts for the four years to 2029-30 have been raised by $5.3 billion.
The upside of the weakening property market is that the government expects to receive an extra $5.6 billion in GST over the next four years. This is also a result of strong property and mining revenues in other states and NSW’s relatively low share of Commonwealth infrastructure funding.
More to come.
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