NSW budget 2021: Treasurer Dominic Perrottet forecasts four-year turnaround for state's economy

The worst is yet to come for NSW's COVID-hit bottom line, but the state government insists green shoots will have the budget back in black by mid-2025.

Tuesday's 2021/22 budget confirmed a deficit of $7.9 billion for the current year, jumping to $8.6 billion for the following 12 months.

But if the numbers sound bad, they're better than previous forecasts.

Treasurer Dominic Perrottet, who four months ago pointed to a $13.3 billion deficit, said the successful suppression of COVID-19 in NSW and government stimulus had prompted increases to GST, stamp duty and payroll tax collections.

The government will continue to spend big on projects and tax relief, aiming the state at a surplus of $466 million in 2024/25 thanks to an economy unshackled by COVID-related restrictions

"This budget gets NSW dressed for success," the treasurer said of the plan which outlines expenditure of $102.5 billion.

"This is a budget with a heart. It looks after the great people of NSW who have done so well during the pandemic."

Despite the confident treasurer, the budget acknowledges "significant risks" to the government's outlook which could "postpone, if not derail, the recovery".

These include the emergence of new COVID-19 variants which are more difficult to suppress, prompting more frequent outbreaks and perpetuating restrictions.

Forecasting the resumption of international travel in mid-2022, the budget cautions that a one-year delay could hamper economic growth by 0.9 per cent and send unemployment one percentage point higher.

It also notes that risks remain about the availability of COVID-19 vaccines to NSW residents and the haste of the federal government's beleaguered jab rollout.

The budget also finds that Australia's continued geopolitical tension with China could hurt NSW's bottom line, should the countries' trade stoush escalate.

Regulations limiting the supply of credit for rapidly-appreciating NSW real estate could also stunt the state's recovery, the budget warns.

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The financial outlook forecasts an increase to NSW's gross state product (GSP) of 3.25 per cent in 2021/22, having grown 0.75 per cent in 2020/21 and contracted 0.7 per cent in the pandemic-affected 2019/20.

Mr Perrottet said net debt for 2020/21 sits at 6.3 per cent of GSP - some $40.6 billion - and will rise to 13.7 per cent of GSP, or $103.9 billion, by mid-2025 with a long-term seven per cent outlook.

"This budget takes NSW from recovery towards reform, with a focus on your family and your future," Mr Perrottet said.

The largest budget measure is a 2.5 per cent annual pay rise for NSW public sector workers over the next four years, costing $2.7 billion.

Measures revealed on Tuesday include the provision of five days' leave for NSW public sector workers who suffer a miscarriage or stillbirth, as well as additional leave for parents whose babies are born prematurely.

Every child aged between three and six will also be allotted $100 for swimming lessons, while NSW Ambulance will receive a $214 million funding boost and $200 million will be allocated to build sporting facilities such as female changing rooms.

Almost $720 million will be spent on NSW's emergency services communications network.

The budget papers reconfirm a $490 million program to drive uptake of electric vehicles, including stamp duty exemptions and rebates.

Community and mobile preschools will become permanently free, there's extended pandemic assistance, and $50 million in vouchers will be made available for Friday lunches in the pandemic-affected Sydney CBD.

An extra $2 billion has been promised by the NSW government to build or upgrade an additional 44 schools across the state.

The government's health budget totals $30.2 billion. Some $4 billion has been spent on COVID-19 pandemic measures since March 2020.

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