New South Wales' 2025-26 State Budget

The NSW 2025‑26 State Budget was delivered on Tuesday 24th June 2025 by the NSW Treasurer, the Hon Daniel Mookhey, MLC in the NSW Legislative Assembly.

Economic analysis

The 2025-26 NSW State Budget is defined by a cautious, fiscally disciplined approach, with a clear focus on housing, essential services, and a measured pathway back to surplus. The budget forecasts a deficit of $5.7 billion for 2024-25, which is an improvement from the previous year’s $10.7 billion deficit. The government projects this deficit will shrink to $3.4 billion in 2025-26 and $1.1 billion in 2026-27, with a return to surplus of $1.1 billion anticipated by 2027-28. This turnaround is underpinned by a sharp reduction in expense growth, now averaging just 2.4% per year, compared to 6.2% in the five years before COVID-19.

Alongside economic stimulus, the budget places a strong emphasis on fiscal repair. The state government acknowledges the challenges posed by high state debt levels, which have been exacerbated by recent economic shocks and increased spending on essential services. In response, the budget outlines a disciplined approach to expenditure, with a commitment to gradually returning to surplus over the forward estimates. This involves careful management of both operating and capital spending, as well as efforts to stabilise debt as a share of the state’s economy. The fiscal strategy is underpinned by a focus on maintaining a strong net worth position, which is crucial for preserving the state’s financial flexibility and credit rating.

Housing is the centrepiece of this budget. The government has committed $5.1 billion to build 8,400 new social homes, marking the largest investment in social housing in decades. To further boost supply, a $1 billion Pre-sale Finance Guarantee is set to fast-track the delivery of 15,000 new homes across NSW, specifically supporting mid-sized builders. The budget also extends a 50% land tax discount for build-to-rent projects indefinitely, providing certainty for investors and more options for renters. Additionally, $122 million is allocated for a works-in-kind scheme, encouraging developers to deliver infrastructure alongside new housing developments.

Essential services receive significant funding boosts. Over the next four years, $3.5 billion will be invested in hospitals, and foster care allowances will rise by 20% from January 2026. Regional NSW is also a focus, with $4.2 billion allocated for disaster relief and recovery, and $2.8 billion for road safety improvements. Aboriginal communities will benefit from a $246.8 million package over four years, supporting programs in health, education, employment, and justice, as well as economic development partnerships with business.

The New South Wales budget also signals a decisive pivot toward innovation-led growth and stronger support for the small business ecosystem. Major investments show the state is putting a spotlight on commercialisation, emerging technologies, and fast-tracking development approvals. A centrepiece of this shift is the $79.7 million Innovation Blueprint, aimed at positioning NSW as a national leader in startup growth and tech adoption. Funding spans early-stage support through the MVP Ventures program, investment in Tech Central, and initiatives targeting female founders, regional leaders, and advanced construction. Complementing this is the $17.7 million Investment Delivery Authority, designed to cut approval times for large-scale projects and unlock private investment, with indirect benefits expected for SMEs across supply chains and regional economies.

Beyond innovation, the budget includes several targeted measures to strengthen the broader business environment. These range from $145 million to expand and digitise building compliance, to $280 million for screen production support—benefiting creative and tech SMEs—and substantial R&D funding in primary industries. A $3.4 billion commitment to TAFE will also help SMEs grow skilled workforces, especially in trades and construction. Meanwhile, large-scale investments in Western Sydney’s infrastructure, including road, rail and the Aerotropolis precinct, are likely to generate flow-on opportunities for small firms involved in logistics, manufacturing, and services. Compared to other states, NSW’s budget reflects a more ambitious, investment-led approach—where innovation and infrastructure are seen as twin engines for long-term competitiveness and private sector growth.

Despite these investments, the budget is restrained in offering broad cost-of-living relief, focusing instead on targeted support for vulnerable groups. The government’s fiscal strategy is to avoid new privatisations or an unfair wages cap, instead relying on careful management and productivity gains. Revenue is expected to rise, with stamp duty collections forecast to grow from $12.3 billion to $15.26 billion by 2027-28, and GST revenue also increasing. In summary, the 2025-26 NSW Budget is realistic in its ambitions. It prioritises housing and essential services while maintaining a disciplined fiscal stance. The return to surplus is credible if economic conditions remain stable and expense control continues. The targeted business incentives and infrastructure investments are likely to support economic growth and employment, helping to underpin NSW’s recovery and long-term prosperity.

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