Overview

The 2025–26 NSW Budget outlines a cautiously optimistic economic outlook, with a projected return to surplus by 2027–28. Inflation has eased to 2.3%, and real wages are growing, but global uncertainty, weak exports, and structural productivity constraints continue to weigh on business confidence. 

Gross debt is forecast to stabilise at around 20% of Gross State Product (GSP) – more than triple the 6.2% level in June 2019. The 2025–26 budget result is a $3.4 billion deficit, with a $1.1 billion surplus forecast for 2027–28. Treasury expects productivity growth to rebound modestly to 0.8%, though long-term challenges remain.

From a business perspective, the budget reflects a steady fiscal trajectory but highlights several key concerns:

• Workers Compensation Reform: A $2.6 billion deterioration in the workers’ compensation scheme has driven a $3.4 billion increase in insurance expenses over five years. Reform is urgently needed to ease the burden on small and medium businesses.
• Public Sector Wage Pressures: The removal of the public sector wage cap has led to strong wage growth, increasing pressure on future budgets to deliver productivity gains without raising taxes.
• Natural Disaster Costs: Disaster-related spending has surged over 1000% since 2019–20, with $4.2 billion allocated across the forward estimates. This includes recovery from recent floods and cyclones, adding fiscal strain and uncertainty.
• Infrastructure Investment: The government is maintaining a significant infrastructure pipeline – $118.3 billion over four years – including $86 billion for general government projects and $32.6 billion for public corporations. This supports regional development and service delivery.
• Federal Funding and Tax Stability: The budget benefits from a $1.7 billion increase in federal funding, driven by new education and health agreements. Importantly, there are no new state taxes – NSW continues to avoid the high-tax path seen in other states like Victoria.
• Skills: To support housing delivery and address skills shortages, the NSW Government is investing $3.4 billion in TAFE and workforce development. 

Fiscal and economic outlook

• NSW economic growth: Growth – Real Gross State Product (GSP) growth has been revised upwards from 0.75% to 1.75%. Jumping to a forecasted 2.25% in 2026-27 before falling back to 2%.
• Unemployment: The unemployment rate forecast for 2024-25 was revised downwards to 4% from 4.5% and is expected to remain stable, increasing to 4.25% for 2025-26 and 2026-27 before returning to 4%.
• Inflation: Inflationary pressures have remained high across the last few years. This budget presents promising signs with 2024-25 to 2028-29 forecasts for the Sydney Consumer Price Index returning to within the RBA’s target band of 2-3%. Additionally, wage growth is expected to just outpace inflation by at least 0.5% across all forecasted years.
• Budget result & net debt: The budget result for 2025-26 sits at a deficit of $3.4 billion with a forecasted return to a surplus of $1.1 billion in 2027-28. In comparison, Western Australia had a net operating balance surplus of $2.4 billion for 2025-26 with a further surplus of $2.6 billion in 2027-28.

Table 1: New South Wales economic performance and outlook (a)

Table 2: Key Budget aggregates for the general government sector

Highlights for business

This section outlines key measures for business and also highlights Business NSW advocacy wins for the business community.

BUSINESS POLICY

• ADVOCACY WIN Investment Delivery Authority: $17.7 million to establish and support the work of an Investment Delivery Authority, to accelerate approvals for major projects across all industries, including advanced technologies and energy. 
• ADVOCACY WIN Innovation Blueprint: $79.2 million to deliver the Innovation Blueprint designed to establish NSW as the best place to innovate, connect with investors, and scale a business, by supporting start-ups from the earliest stages to ensure their viability and success.  
• ADVOCACY WIN ESL Reform: The NSW Government continues to progress ESL reform, with IPART preparing to monitor insurer pricing behaviour. This is a key step toward reducing insurance costs for small businesses. 
• SafeWork NSW: $262 million to better support injured workers by restoring the independence of SafeWork NSW, ensuring it is resourced to protect workers from harm, including psychosocial hazards.
• Industrial Manslaughter: An additional $6.7 million to prosecute industrial manslaughter, by hiring additional staff including prosecutors, solicitors and witness assistance officers.

HOUSING

• ADVOCACY WIN Housing delivery: $83.4 million to accelerate planning approvals, including large-scale market, social and affordable housing projects. This includes $10.6 million for the newly established Housing Delivery Authority, which has sped up planning approvals for 53,500 homes across 136 residential projects since January.
• ADVOCACY WIN Construction trades to support housing: To support home building and the delivery of quality housing, $1.2 billion will be injected into TAFE training, including funding to accelerate the delivery of 4,800 construction workers. 
• ADVOCACY WIN More well-located homes: The NSW government is committing $7.6 million to continue its audit of surplus land to identify well-located sites that are suitable for housing to deliver more homes. 
• Supporting housing infrastructure: In addition to measures funded over the last two years, $20.9 million will be invested to support regional councils to bring forward critical enabling infrastructure for new homes, and $10.1 million to address water issues affecting housing and development. 
• Build-to-rent tax relief: Making permanent a 50% land tax concession on new build-to-rent projects. The temporary land tax concession was due to expire in December 2039.

COST-OF-LIVING RELIEF

• Toll relief - $60 weekly toll cap: Implemented since 1 January 2024, eligible motorists that spend between $60 and $400 on tolls per week can continue to claim a rebate of up to $340 per week. The rebate is calculated and claimed each quarter. 
• Energy Bill Relief Fund: An extension of the National Energy Bill Relief Fund of $150 to the electricity bills of all households and eligible small businesses from 1 July 2025 to end of 2025. Delivered by the NSW Government with Federal Government funding. 
• Cheaper Homes Batteries Program: From 1 July 2025, households and small businesses may be eligible for around a 30% discount on the upfront cost of installing small-scale battery systems. The discount will be based on the solar battery’s usable capacity and will gradually decrease until 2030. 
• Virtual Power Plant Scheme: Double the current incentive from 1 July 2025. For example, the payment you receive for connecting a 27 kWh battery to a Virtual Power Plant has the potential to increase from up to $800 before 1 July 2025, to up to $1,500 from 1 July 2025.

SKILLS, INNOVATION, AND GROWING THE WORKFORCE

• ADVOCACY WIN Rebuilding TAFE: There will be $325.0 million in investment to convert TAFE teachers and staff to permanent positions, $380.4 million to renew and delivery critical maintenance work to TAFE NSW campuses across the state, and $100.0 million to relocate Bankstown TAFE.
• Fresh Start Program: $51.2 million in 2025-2026 for recruiting an additional 1,300 apprentices, trainees and cadets in Councils across NSW. This is part of an existing commitment of $252.2 million investment over six years.
• Strengthening education and early learning: The Better and Fairer Schools Agreement between the NSW and Federal Governments includes $10.4 billion investment in NSW Schools, including $5.6 billion NSW government investment to increase average funding per student.
• First Steps Program: $200.9 million in 2025-2026 for expanding early education for Aboriginal communities.
• Expanding the public provision of early childhood education: $10.0 million in 2025-2026 to progress work on expanding the public provision of early childhood education and care in NSW.

Equipping the workforce to build NSW homes: As part of the plan to tackle the housing crisis, the Minns Labor Government will deliver $3.4 billion in investment in TAFE and Skills to build the skilled workforce needed to construct more homes across the state. This includes:

• $40.2 million over two years to fund up to 23,000 fee free apprenticeships and traineeships for priority qualifications across TAFE and Smart and Skilled RTOs.
• $13.8 million Construction Workforce Package to retrain, upskill and support 4,800 workers into residential construction.
• $2.0 million for the Trade Readiness Program for encouraging up to 3,000 NSW school students to consider a career in the construction industry.

ENERGY & ENVIRONMENT

• ADVOCACY WIN Central West Orana REZ Delivery and Construction Phase: The NSW government has committed $498.5 million over four years to the delivery of the Central-West Orana REZ including land acquisitions and biodiversity offsets required under planning approvals.
• Transmission Acceleration Facility: The government is continuing to invest $2.1 billion over the next four years in the Transmission Acceleration Facility, primarily to support the delivery of the five Renewable Energy Zones at Central-West Orana, New England, Hunter-Central Coast, Illawarra and South West.
• Supporting the delivery of renewable energy across the state: The government will spend $115.5 million on a new logistics precinct at the site of the former BHP steelworks in Newcastle, to support the delivery of renewable energy across the state, including storage for wind turbines and transformers.
• Natural disasters: An additional $4.2 billion will be allocated for disaster relief, supplementing the support already provided by the NSW and Federal Governments since the 2019-20 bushfires.
• Response and recovery: The NSW Government, in partnership with the Federal Government, will provide critical relief and recovery support to communities impacted by Tropical Cyclone Alfred, with $154.5 million in relief and recovery, and $358.3 million for disaster recovery and relief in response to the May 2025 East Coast floods.
• Long lasting biodiversity protections: The government had committed $472.9 million over four years for biodiversity protections and management through improving the Biodiversity Offset Scheme, nature protection, visitor infrastructure in national parks, biodiversity conservation and environmental water management.
• Caring for Nature: The NSW government is committing funding to various projects for coastal restoration and improve water health including: $91.3 million to renew and upgrade visitor infrastructure in national parks, $21.5 million for the Stockton Beach Repair project, $17.6 million for Local Land Services, $12.4 million to maintain and access fire trails on Crown lands.
• Improving water health: The NSW government is committing funding to various projects for improving water health including: $319.1 million for the Sustainable Diversion Limit Adjustment Mechanism Program to improve river health and increase water returned to the environment, $75.1 million for river health, $3.0 million to improve water quality for Coogee stormwater, $2.7 million for critical local utilities reforms, $1.5 million for coastal waterway improvements in the South Coast, $948k for Dams Safety NSW.

INFRASTRUCTURE & TRANSPORT

• ADVOCACY WIN Upgrading cyber security: The NSW Government will include $87.7 million to fund Cyber Security NSW’s work with government entities to prevent, detect and recover from cyber incidents.
• Essential Infrastructure Plan to build a better NSW: $118.3 billion over four years towards state essential infrastructure to tackle the housing crisis, build essential infrastructure, deliver major projects more efficiently and invest in water and power systems. 2025-2026 includes $30.0 billion of this investment for: $844.3 million to procure new buses, $644.1 million for the integrated stormwater and recycled water scheme in the Mamre Road Precinct, $336.1 million to continue delivery of economic precincts in Parkes, Wagga Wagga, Moree and the Snowy Mountains, $100.0 million for new screen infrastructure to support creative economy, $756.9 million for the Prospect Precinct Plant to continue supply of safe, secure and reliable drinking water for Greater Sydney.
• Road upgrades: This year’s budgets provide $2.4 billion in new and improved Sydney roads, in partnership with the Federal Government, including: $1.0 billion for the Fifteenth Avenue upgrade between Liverpool and the new airport, $500.0 million for Mona Vale Road West, $220.0 million for Henry Lawson Drive upgrade, $200.0 million for Homebush Bay Drive, $80.0 million for Western Sydney Heavy Vehicle Rest Area, $25.0 million for Devonshire Link Road and Bradfield Metro Link Road planning, $40.0 million for Dapto Ramps planning, $12.0 million for Bucketts Way and Medowie Road/M1 intersection upgrades planning.
• Toll reform: $58.0 million to establish, operate and manage the NSW Motorways Entity and continue the toll reform.
• Infrastructure for Western Sydney: The NSW Government is building a stronger and prosperous Western Sydney through investments over the next four years including: $10.8 billion over four years for the Sydney Metro West – connecting Greater Parramatta with the CBD, $5.5 billion for roads, $3.9 billion to maintain, upgrade and build new schools in Western Sydney, $3.6 billion for Sydney Metro – Western Sydney Airport, $3.4 billion in health infrastructure for Western Sydney, including Rouse Hill Hospital, $801.4 million over four years for the City to South West Metro.
• Improving public transport: The NSW government is investing $522.2 million to improve public transport. This includes $369.9 million to maintain and uplift bus services, including connections to trains and metros, and increased school services, $82.3 million for 75 new buses, $70.0 million for a 35-metre ferry wharf and upgrading Wentworth Park Light Rail stop at the new Sydney Fish Market.

SUPPORT FOR REGIONS

• Investing in disaster response and recovery: $2.3 billion for restoration works to repair local and state roads damaged in major flood events, including in the Hunter and Northern Rivers, and $1.6 billion for other disaster relief and recovery programs funded through the Disaster Relief Account administered by the NSW Reconstruction Authority.
• Protecting our environment: $41.4 million for national park projects to reduce vulnerability to future natural disasters.
• Secure water – river health program: $319.1 million for Sustainable Diversion Limit Adjustment Mechanism Program to improve river health. 
• Secure water - river constraints program: $255.6 million for the Murray and Murrumbidgee River Constraints Program to increase the frequency and extent that rivers connect to wetlands and floodplains.
• Future Jobs and Investment Authority: $27.3 million to support the establishment of Future Jobs and Investment Authority to economic transition of coal-reliant regions to ensure they can coordinate new economic opportunities.
• Regional Operations Model Hubs: $5.5 million for regional operation hubs to ensure place based mentorship for First Nations Students and support their transition from school to further education, training and employment.
• Rural and Regional schools upgrades: $2.1 billion package across NSW that will include the rebuild of Willyama High School and Primary School in the West Dapto area.
• TAFE Manufacturing Centres of Excellence Illawarra and Hunter Newcastle: Delivered in partnership with the Federal Government the TAFE Manufacturing Centres will connect industry and education partners to deliver innovative microskills, microcredential and Higher Apprenticeships. 
• Wollongong Hospital expansion: $220.0 million for the expansion and redevelopment involving early and enabling works including site investigation, land acquisition and refurbishment works.
• Farmer and agribusiness investment: $45.0 million for adoption of digital technology and on-farm connectivity solutions to improve resource management, boost productivity and enhance water security.

For more information from Business NSW, please contact:

Ben Pike, Head of Marketing and Media  |  ben.pike@businessnsw.com

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