NSW Treasurer Daniel Mookhey warns economic forecast slashed due to Iran war
Projected growth in the NSW economy has fallen from 2.5 per cent to just 1 per cent for next financial year following the outbreak of war in the Middle East, Treasurer Daniel Mookhey has revealed.
The revelation, coming weeks before the NSW budget is set to be handed down yet, is the latest sign of the damage done by the United States’ and Israel’s war on Iran to the Australian economy.
Appearing before the Sydney-based McKell Institute on Wednesday, Mr Mookhey is expected to state NSW Treasury “will lower our forecast for economic growth significantly” in the June budget.
“Even if the war in the Middle East ended today, petrol prices are not falling tomorrow. Oil markets will take time to normalise. If they ever do,” he will say.
“Instead of the NSW economy growing by the 2.5 per cent in 2026-2027 that we expected in December, the NSW Treasury expects the economy to grow by just one per cent in the year ahead.”
The NSW government will take the extraordinary step of releasing its economic forecasts one month before the budget.
Mr Mookhey is expected to say the economic slow down is more pronounced in NSW then elsewhere in the country.
“The simple reason is that higher inflation has led to higher interest rates which is lowering consumption spending; the point of the RBA’s increased interest rates,” he will say.
“But, the more complicated explanation is this: higher interest rates hurt working Australians in every state, but they hurt working Australians more in this state.”
The typical working family taking out a new mortgage today in NSW is likely to borrow $873,000, Mr Mookhey will say.
“But a family taking out a mortgage in Victoria – Australia’s next biggest state – will borrow about $677,000. 28 per cent less,” he will say.
“That is why NSW fares better when interest rates fall. And fares worse when they rise.”
One Nation fight
The NSW Labor government is facing a resurgent One Nation when voters return to the polls early next year.
Pauline Hanson’s right-wing populist party clinched the NSW federal seat of Farrer earlier this month, and performed well in the South Australia state election.
Mr Mookhey said the federal Liberal Party had “decided to agree with One Nation” to opposed net-zero in the state.
Late last year, then NSW Opposition Leader Mark Speakman reaffirmed the party’s commitment to net zero, leading to a split with their coalition party, the NSW Nationals.
The new Liberal leader, Kellie Sloane, has faced pressure over the policy as the federal branch shifts further to the right.
“I have no idea if the NSW Liberal Party agrees with the Federal Liberal Party, which agrees with the One Nation Party,” Mr Mookhey will say.
“The Member for Vaucluse (Ms Sloane) could end this uncertainty by declaring whether she is for or against the state’s legislated net zero targets.
“To campaign against NSW’s net-zero targets is to campaign for a NSW recession.”
Mr Mookhey is expected to say the number of renewable energy projects now under construction, “combined with all transmission lines and grid connections currently being fixed, extended or upgraded, explains why the NSW economy is set to avoid a recession”.
“NSW is home to this investment boom because NSW is (and was) the first state to truly have grasped that reaching net zero is a sound economic strategy,” he will say.
