NSW Treasurer announces $656 million shortfall

Weaker economic conditions and softer revenue forecasts have cancelled out benefits from a prospering property market, according to NSW Treasurer Mike Baird.

Presenting the mid-year review at a CEDA event in Sydney, Mr Baird said the government's main focus will be maintaining expenses and increasing revenue.

"There are undoubtedly weaker economic conditions, slightly weaker since the budget results and softer revenue forecasts on the back of that," he said.

"As a government it's very clear that the cornerstone of the fiscal strategy has been to maintain control over expenses and we've done that."

There has been a reduction of $60 million in revenues on a net basis over the next four years and a $703 million increase in expenses due to factors such as the rise in interest rates and superannuation, he said.

The state deficit has also been revised with a $656 million shortfall, causing the target surplus to be moved to the 2016-17 year, he said.

Despite the shortfall, the government is committed to achieving a sustainable surplus.

"The target for us is to get back to a sustainable surplus which I argue is $1 billion a year," he said.

"The reason I want $1 billion a year… is because it is exactly the capacity of the Government to absorb economic shock, to put that money into infrastructure rather than borrow it, it is exactly the right sort of strategy and we are on track to get there."

On the topic of key industries, Mr Baird said the property sector is showing growth and promise for the economy.

"Now the shining light is the housing sector, that was at 50 year lows and that's started to move…it is shifting upwards," he said.

Speaking on infrastructure, he said the long term leasing and sale of assets such as the desalination plants, Port Botany and Kembla have provided funds to invest in building new infrastructure, which remains a priority for government.

"Infrastructure remains a critical piece of the strategy," he said.

"What state governments should be doing right now … is undoubtedly investing in infrastructure."

He also said infrastructure will drive growth in NSW.

"It is the way that we are going to drive the economic growth in this state, both in the short term as the jobs come into the ground and long term," he said.