Continuing strength in Sydney's property market and increased dividends from state corporations will help NSW deliver a higher-than expected surplus in the coming year.
The NSW government forecast a surplus of $2.7 billion for 2017/18 in Tuesday's state budget, nearly doubling the $1.5 billion surplus predicted during its mid-year budget review in December.
"The outlook remains strong with above-trend growth forecast over the next three years," NSW Treasurer Dominic Perrottet said.
The state posted a surplus of $4.5 billion for the current financial year, thanks mainly to the booming housing market and one-off transfer duty payments from asset sales.
Transfer duties, which make up more than 30 per cent of the government's tax revenue, far exceeded expectations in 2016/17.
This was primarily driven by a 9.6 per cent jump in revenue from residential stamp duty but also included one-off transfer duty payments from the partial lease of Ausgrid and Endeavour Energy during the year.
Higher than expected coal export prices also boosted royalties by about $300 million to $1.56 billion for the year.
Stamp duty revenue from residential property is expected to continue growing but the state government is now clearly expecting the housing market to moderate.
"Macro-prudential regulations along with new Commonwealth measures are expected to moderate activity in the housing market in 2017/18," the government's budget papers said.
It expects growth in residential stamp duty revenue to nearly halve to 5.9 per cent in 2017/18, and then ease further to average 5.4 per cent over the next three years.
The state also expects overall revenue growth to be hit by a decline in its share from the national pool of goods and services tax revenues on account on account of strong economic growth in the state.
As a result, GST revenue forecasts over the four years to 2019/20 have been revised down by $1.4 billion.
Net debt will fall to a negative $7.8 billion at June 30, as cash holdings are temporarily boosted by the partial sale of Ausgrid and the Land and Property registry services, but this is expected to rise to $18.6 billion by June 2021 as proceeds are reinvested in infrastructure.
