It is responsible to plunge NSW into debt this financial year to guarantee future jobs, Premier Barry O'Farrell says.
NSW will be in the red by more than $1 billion in 2011-12 to pay for transport infrastructure, including the North West Rail Link, News Ltd reports the budget will reveal on Tuesday.
It will be the state's first deficit in five years and only the second in 15 years.
Mr O'Farrell said the deficit was the only way to guarantee jobs for the future.
"We've said we will ensure that we will put in place the economic infrastructure that guarantees the future of the state," he told Fairfax Radio network on Monday morning.
Any debt the state incurred would be "a responsible debt", Mr O'Farrell said.
"Most people buy their house, not with cash, but through a bank loan, and as long as you know at the end of the day you can afford the repayment, that the asset is going to be worth more in the long run than it was when you bought it, that is a responsible decision."
He also said $314 million had been put aside for the North West Rail Link over the next 12 months.
Over four years, more than $2 billion will be spent on the link.
It would help, the premier said, "if the federal government backed the state project that is number one in terms of our transport projects".
The budget will also provide more than $1 billion over four years to continue construction of the South West Rail Link between Glenfield and Leppington, News Ltd reports.
About $152 million will be allocated to buy and upgrade train carriages, $118 million will be spent on 261 new buses and $110 million will go towards the roll-out of electronic ticketing.
