NSW is facing a string of deficits stretching into the future because of the global economic crisis, but Treasurer Mike Baird says there's no reason to panic.
The half-yearly review puts the budget in deficit for each of the next four years, just three months after the September budget forecast small surpluses from 2012/13.
Mr Baird said while expenses and revenues from state taxes such as stamp duty and payroll tax were in line with September's budget forecast, GST revenues from Canberra had been hit by the world's worsening financial situation.
The forecasts follow the release of the federal government's Mid-Year Economic and Fiscal Outlook (MYEFO) earlier this month, which also highlighted global economic problems.
Despite the budget deterioration, and the state's goal to return to "sustainable surpluses", Mr Baird warned against "knee-jerk" reactions to bring the bottom line back into the black.
"This is not a time for panic," he told reporters in Sydney.
"As we go forward we certainly will monitor what happens globally and the impact it has on our finances here in NSW, and we will take appropriate and considered action.
"It is not the time for knee-jerk reaction, it not the time for chaos, it is time for calm, measured responses."
The deficit for this financial year was revised downward from $718 million to $185 million, after a commonwealth decision to prepay road grants improved the bottom line.
However, the expected 2012/13 surplus of $292 million has turned into a deficit of $321 million.
The expected 2013/14 surplus of $156 million is now expected to be a small deficit of $4 million, while a deficit of $234 million is forecast in 2014-15, compared to the September budget prediction of a $152 million surplus.
Mr Baird said the promise made in September to find $8 billion in savings would not be impacted by the budget downturn.
He also wouldn't rule out more cuts in next year's budget in June, saying he would consider further savings measures if needed.
"There is a $60 billion budget that has opportunities across it," Mr Baird said.
If the government hadn't reined in expenses through reforms such as the public-sector wage changes, or the reform of the police death and disability scheme, the budget would be weighed down by deficits of close to $6 billion, he added.
Mr Baird said the budget downturn would not impact on the government's infrastructure program, which includes plans to build the North West and South West rail links in Sydney, and upgrade the Pacific Highway.
"One of the critical things ... a state government should do in the current circumstances (is) get on with the job of building infrastructure," he said.
The NSW opposition claimed the coalition government's economic credentials were in tatters, with the budget plunged into three successive deficits for the first time in 20 years.
Unions NSW called on the government to rule out further public-sector job cuts, after 5000 redundancies were announced in September's budget.
"Cutting public-sector jobs during a downturn is completely nonsensical - it's at times like these that the public sector needs to act as a buffer for the rest of the economy," Unions NSW secretary Mark Lennon said in a statement.
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