NSW Premier Chris Minns distances Labor from Anthony Albanese as Treasurer Daniel Mookhey unveils debt cap

NSW Labor is distancing itself from Anthony Albanese by promoting itself as a responsible economic manager aiming to slash State Government debt levels.

With Premier Chris Minns facing voters in five months’ time, his Treasurer Daniel Mookhey is promising to cap net debt at 15 per cent of gross State product or the size of the economy.

This would mark a contrast with the Albanese Government, whose Treasurer Jim Chalmers has presided over net debt making up 18.8 per cent of gross domestic product in 2025-26, with the Commonwealth Treasury expecting that to keep climbing in the coming four years to almost 22 per cent.

Mr Mookhey promised a net debt cap in NSW could be achieved without privatising assets or imposing an “unfair wages cap” on State public servants as the former NSW Coalition government did when it came to power in 2011.

“That would keep New South Wales with the second-lowest debt of any State, behind Western Australia. No cheating needed,” Mr Mookhey will tell the Sydney Institute on Tuesday night.

“Together, the responsible debt plan and the carefully crafted debt ceiling get the balance right for the long-term prosperity of the people of New South Wales.

“So, from tonight, every promise in the NSW election campaign, ours included, can be measured against two fiscal guardrails: a plan to cut debt by at least $10bn, and a net debt ceiling of 15 per cent of GSP.”

In the next Parliament, the State Government is promising to amend the Fiscal Responsibility Act, arguing it had little choice because Sydney is home to Australia’s most expensive house prices, meaning interest rate rises hit harder, with the Reserve Bank cash rate last month rising to a 15-year high of 4.6 per cent.

“Bigger mortgages mean bigger interest repayments. They get bigger when interest rates go higher,” Mr Mookey said.

“Which results in families — especially young families — paying more to the banks. Therefore, having less to spend elsewhere as interest rates rise.

“That is why tonight I can tell you that the Minns Government is not planning to win the next election by promising to spend money NSW’s families do not have, on promises the state cannot afford.”

NSW has a AAA credit rating from credit rating agencies Fitch and Moody’s but only has an AA+ rating from S&P Global, with its net debt of $117.5 billion making up 13 per cent of the economy in June 2026.

Western Australia has a AAA credit rating from Moody’s and S&P Global, with Fitch not providing a WA rating.

They are the only States with AAA credit ratings.

The Australian Government has a AAA credit rating from Moody’s, Fitch and S&P Global, with its net debt of $556b making up 18.8 per cent of GDP.

But Federal Government spending — at 26.9 per cent of GDP — is the highest in four decades outside of COVID, meaning higher debt will lead to higher interest payments.

Gross debt of $971.4b made up a third of GDP during the last financial year and has since surpassed $1 trillion.

Australian Government bond yields for three- and 10-year bonds last month reached levels last seen in 2011, with the Reserve Bank’s September meeting minutes noting the construction of artificial intelligence data centres had led to a fight for capital.

“Longer-term government bond yields had increased notably across advanced economies since the previous meeting,” it said.

“Members noted that a rise in term premia may have been due to increased debt issuance by both governments and companies developing artificial intelligence (AI) infrastructure and capabilities, compounded by changes in the investor base for government debt and greater economic and policy uncertainty.”

The NSW Government is distancing itself from Mr Albanese, even though he hails from their State, as NSW Labor faces voters in March with One Nation polling strongly in the ALP heartland Hunter electorates of Cessnock and Maitland west of Newcastle.