NSW Treasurer Daniel Mookhey has handed down a restrained third Budget with targeted support for electorally important areas in Western Sydney and regional NSW.
In a similar style to his last two budgets, Treasurer Mookhey delivered a carefully curated spending agenda, with structural fiscal headwinds deterring the government from large-scale reforms. The Treasurer is also keeping a close eye on the state’s credit rating.
The Budget projects a deficit of $3.4 billion in 2025-26 down from $5.7 billion in 2024-25, before returning to an expected surplus of $1.1 billion in 2027-28 and 2028-29.
With the lingering fiscal effects of COVID-19, the GST carve-up which saw NSW almost $12 billion worse off over the forward estimates, wage rises across the public sector, the challenge to legislate workers’ compensation reforms, and a pre-election budget next year, the government has once again opted for caution over substantive change. The Budget also demonstrates a disciplined government, with Ministers looking forward to a less restrained budget next year.
While infrastructure remains a key line item this year, the Treasurer has focused spending of $118.3 billion over four years on replacing ageing assets and providing the power and water connections needed to build new homes.
Western Sydney was a big winner with an additional $4 billion earmarked for additional infrastructure spending, including $835 million for the Aerotropolis region, $50 million going to road upgrades and $644 million for water infrastructure.
$55.6 billion will be spent over four years on public transport projects, including Sydney Metro, regional roads and rail fleet. Meanwhile, $58 million has been allocated to establish, operate and manage the NSW Motorways Entity, and continue the Toll Reform Program. However, there has been no extension to the weekly $60 road toll cap beyond January 2026.
Other infrastructure commitments include:
With the aim of building 377,000 new homes by July 2029, housing also remains a key focus. This Budget will see the government act as a guarantor on new housing developments worth up to $1 billion, introduce tax breaks for investors in the build-to-rent space, and establish new ‘work-in-kind’ agreements for developers to fund public amenities rather than having to make a Housing and Productivity contribution. However, with Rosehill Racecourse no longer an option for new homes, the government will be focused on finding an adequate ‘plan b’ after the Budget has been delivered.
Spending commitments include:
Investment push to focus on government priorities
In another key Budget announcement, the new Investment Delivery Authority (IDA) aims to fast-track investment for non-residential projects over $1 billion across all industries, with a focus on advanced technology and energy. The IDA closely mirrors the structure of the successful Housing Delivery Authority, which has expedited 136 proposals and 53,300 potential new homes.
This sits alongside a range of smaller commitments aimed at boosting local industries, including $140 million in biosecurity enhancements and R&D, as well as further commitments to further elevate tech and innovation.
This year’s Budget continues the investment in the Electricity Infrastructure Roadmap, transforming our electricity system to provide clean, reliable and affordable energy. This supports the state’s renewable energy zones (REZ), aiming to balance the urgency of the energy transition with the need to ease pressure on bill-payers and invest in host communities to strengthen social licence.
The government has made a number of major new commitments, including $2.1 billion over the next four years for the Transmission Acceleration Facility, aimed at accelerating the infrastructure needed to support the state’s five renewable energy zones. This builds on the $1.1 billion invested to date on these critical projects.Host communities for the Central-West Orana REZ will be the first cab off the rank with a $128 million Community and Employment Benefit Program, with additional future funding earmarked for other REZ host communities.
The Budget includes an additional $579 million from the Federal Government to extend the national Energy Bill Relief payment, providing all NSW households and eligible small businesses with energy bill rebates of up to $150 between 1 July and the end of 2025.
Despite showing restraint in other areas of infrastructure spending, the Budget has a strong focus on health and education spending in regions with the greatest need, including Western Sydney.
The new 10-year Better and Fairer Schools Agreement injects $10.4 billion of funding into public schools. The NSW Government is adding $5.6 billion alongside $4.8 billion from the Federal Government. This has seen an increase in funding per student from $14,819 in 2023, to an estimated $17,022 in 2025.
The government has invested a record $9 billion in school infrastructure investment over four years for new and upgraded schools, with a further $50 million to expand high potential and gifted education opportunities at public schools across the state.
Other commitments include:
In health, the NSW Government will invest $12.4 billion to build and upgrade health infrastructure over the next four years. Approximately $3.3 billion is earmarked for 2025-26, with major commitments including $700 million in additional funding for the new Bankstown Hospital.
In other commitments:
Treasurer Mookhey has maintained the steady course charted in the first two budgets delivered by the Minns Labor government. While Mookhey’s fiscal cautiousness is forecast to result in a $1.1 billion budget surplus in 2027-28, the key challenge for the government will now be spurring on economic growth which remains relatively slow.
The Treasurer has now laid the groundwork for looser purse strings in the next budget cycle, leading into the 2027 state election.
Reach out to our Sydney team if you would like to discuss the new New South Wales Budget and what it means for you.
Chris Grima, Partner and Sydney Office Head, SEC Newgate Communications – [email protected]
Kaila Murnain, Associate Partner, SEC Newgate Communications – [email protected]
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