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The Guardian - AU
The Guardian - AU
National
Peter Hannam

NSW government delays budget after uncovering $7.1bn in fresh ‘financial pressures’

NSW Labor MP Daniel Mookhey
NSW treasurer Daniel Mookhey said the government would press ahead with plans to abolish the wage cap on public services in the budget. Photograph: Flavio Brancaleone/AAP

The Minns government says it has uncovered more than $7.1bn in fresh “financial pressures” since taking office last month, and will delay the New South Wales budget three months until September while it conducts a “line-by-line” spending review.

Additional “difficult to avoid” costs include whether to extend funding for 1,112 temporary nurse roles that were only budgeted for two years to cover surge capacity estimates, the state treasurer, Daniel Mookhey, said.

“A person who walks into a hospital expects there to be a healthcare worker,” Mookhey told a media conference in Sydney on Monday.

Out-of-home care cost overruns will also total $700m, while the state’s $70m cybersecurity unit is not funded beyond 2024-25, he said.

Mookhey confirmed the government would press ahead with plans to abolish the wage cap – set at 3% for 2023-24 and 2.5% for subsequent years – on public services.

“That remains our policy, and that remains our intention,” he said on Monday, adding the extra wages bill would be funded “by productivity gains and budget savings” and that a budget surplus by 2024-25 “remains our goal”.

Labor fell two seats short of forming majority government in NSW last month but its 45-seat haul was sufficient to end 12 years of Coalition rule in Australia’s most populous state.

In its pre-election assessment, the independent parliamentary budget office deemed the costs of Labor’s promises would improve the state’s bottom line by about $1.3bn more than the previous government.

It highlighted, though, a risk to the budget if Labor did not cover increases in public sector wages with productivity gains. Each percentage point increase in wages above the existing caps would add $2.6bn over three years without those improvements, the office said.

Echoing the measured tone of the election campaign, Mookhey declined to label his predecessors as deceptive, or say they had left behind budget “black holes”. “We aren’t interested in casting blame,” he said.

In place of the June budget, Mookhey instead will provide parliament with an economic update. The finance minister, Courtney Houssos, will also conduct a “comprehensive review” of spending to determine what savings can be made, with a report due by June.

“In this difficult economic environment, every family, every household, every business is taking a fresh look at the money they are spending,” Houssos said. “We are going to do the same for the government.”

A separate strategic infrastructure review of significant capital works will be led by Ken Kanofski and supported by Infrastructure NSW.

Preliminary briefings show the capital side of the budget is also facing $2.2bn in financial pressures, Mookhey said. “This is a conservative estimate and it is a volatile number.”

NSW’s interest costs had increased from 0.43% for three-year debt to about 4% in a year, he said.

Separately, Mookhey disclosed he had held an “introductory meeting” 10 days ago with Brookfield, the Canadian investment group seeking to take over Origin Energy, one of Australia’s biggest electricity generators.

Origin said in February last year it planned to close the Eraring power station – Australia’s largest coal-fired power plant with a capacity of 2,880MW – by August 2025.

The coalition government sold Eraring to Origin in 2013. During the election campaign Labor said it wouldn’t rule out buying it back if such a move were necessary to ensure reliability of supply.

“There’s no change in the government’s position here,” Mookhey said. “All options remain on the table when it comes to the future of the Eraring power stations.”

AGL Energy’s Liddell coal-fire power station – now operating at less than 1,000MW – is to close by the end of this month.

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