The Minns Labor Government will slash gross debt by more than $7 billion by suspending contributions to the NSW Generations Fund (NGF) this year, ahead of a major shakeup of the state's fund management policies.
The new settings will be the largest single gross debt reduction measure proposed in the upcoming 2023-24 Budget. Interest payments are likely to fall by $1.1 billion over the forward estimates.
The government is reviewing the way in which NSW's investment funds are managed. This includes ending the previous government's policy of using $25.3 billion of borrowed money to invest in international stock markets, bond markets and other financial assets.
It also means investigating more efficient management of the state's other funds.
This second step will involve overhauling management of the state's funds under management, totalling $108 billion. The government will task T-Corp with developing a reform to maximise NSW's investment returns by initially consolidating 6 separate government funds, of around $43 billion, into a more cost-effective structure.
The government's new funds management strategy will be implemented in next year's budget. This will assist the government in managing the impact of the new NGF settings on the state's finances.
The upcoming budget will also provide a more transparent picture of the state's finances by providing further information about the budget result, excluding net investment returns from the NSW Generations Fund.
The Minns Government's new policy will begin to unwind the previous government's risky practice of taking on more debt to repay debt. It also responds to the recent Upper House inquiry, which called for an overhaul of NGF policy settings.
Treasurer Daniel Mookhey said:
"NSW is going to stop playing around in financial markets using its credit card.
"The previous government was willing to risk $25.3 billion to improve the state's net debt position by just $2 billion. I'm not."
"This will be the biggest step we take to reduce the state's gross debt in this year's budget. It shows the government is carefully repairing the budget so we can fix NSW's essential services.
"Reforming the NGF will allow us to shake up how the state's investment funds are managed. That is a reform opportunity we intend to take."
