The pandemic and extensive flooding is being blamed for a doubling of next year's NSW budget deficit and smaller future surpluses.
The state's mid-year budget update projects the deficit in the current 2022/23 financial year will grow to $11.4 billion, up $140 million from the figure estimated last June.
The 2023/24 deficit has blown out to $6.5 billion, up from $2.7 billion, while estimated surpluses for 2024/25 and 2025/26 have been wound back by a total of $499 million.
But Treasurer Matt Kean said only the coalition government could return the budget to surplus.
"We also know the importance of restoring fiscal buffers for whatever comes next," he told business leaders in Parramatta on Tuesday.
Labor's policy to remove the three per cent public-sector wages cap would "blow the surplus out of the water and add further fuel to the inflation fire", Mr Kean said.
"We have a long-term economic plan to reform our state for the future, a plan to keep our economy growing," he said.
Mr Kean also revealed first-home buyers had saved $30 million in up-front costs by choosing annual land tax over the "terrible tax" of stamp duty.
About 850 people had used the scheme since it began in mid-January, he said.
With less than seven six weeks to go until the election, Mr Kean also used the budget update to spruik the government's policies for universal preschool, increased support for women in the workplace and a substantial boost to the healthcare workforce.
The ratio of gross state product to state debt will peak in 2025/26.
