Projected economic growth in NSW slashed by 1.5 per cent as Treasurer blames inflation, war in Iran
Finance Minister Daniel Mookhey has revealed that projected growth in the NSW economy has fallen from 2.5 per cent to just 1 per cent for the next financial year following the outbreak of war in the Middle East.
This statement, which comes weeks before the NSW budget is due to be distributed, is the latest sign of the damage inflicted on the Australian economy by the US and Israel’s war against Iran.
Appearing before the Sydney-based McKell Institute on Wednesday, Mr Mookhey is expected to say the NSW Treasury will “significantly reduce our economic growth forecast” in its June budget.
“Even if the war in the Middle East ends today, oil prices will not fall tomorrow. It will take time for oil markets to return to normal. If it returns to normal,” he will say.
“Instead of the 2.5 per cent growth of the NSW economy in 2026-2027 we expected in December, the NSW Treasury expects the economy to grow by just one per cent next year.”
The NSW government will take the extraordinary step of announcing its economic forecasts a month before the budget.
Mr Mookhey is expected to say the economic slowdown is more pronounced in NSW than elsewhere in the country.
“The simple reason for this is that higher inflation leads to higher interest rates, which reduces consumption spending, which is the purpose of the RBA raising interest rates,” he will say.
“But the more complex explanation is that higher interest rates hurt working Australians in every state, but they hurt working Australians more in this state.”
Mr Mookhey says the typical working family taking out a new mortgage in NSW today will likely borrow $873,000.
“But a family taking out a mortgage in Victoria, Australia’s next largest state, will borrow around $677,000. That’s 28 per cent less,” he said.
“So NSW is better off when interest rates fall and worse off when they rise.”
One Nation struggle
The NSW Labor government will face a resurgent One Nation when voters return to the polls early next year. Pauline Hanson’s right-wing populist party won the federal seat of Farrer in NSW earlier this month and performed well in South Australia’s state elections.
Mr Mookhey said the federal Liberal Party had “decided to engage with One Nation” to oppose net zero in the province.
Late last year, then-NSW Opposition Leader Mark Speakman reaffirmed the party’s commitment to net zero, leading to a split with coalition party NSW Nationals.
New Liberal leader Kellie Sloane faces pressure on policy as the federal branch moves further to the right.
“I have no idea whether the NSW Liberal Party agrees with the Federal Liberal Party, which agrees with the One Nation Party,” Mr Mookhey will say.
“The Member for Vaucluse (Ms Sloane) can put an end to this uncertainty by declaring whether she is for or against the province’s statutory net zero targets.
“Campaigning against NSW’s net zero targets is campaigning for recession in NSW.”
Mr Mookhey is expected to say the number of renewable energy projects currently under construction “along with all the transmission lines and grid connections now being fixed, expanded or upgraded explains why the NSW economy is poised to avoid recession”.
“NSW is home to this investment boom because NSW is (and was) the first state to truly understand that getting to net zero is a sound economic strategy,” he will say.
