'Won't be fixed overnight': NSW Labor's budget warning

Dan Himbrechts/AAP PHOTOS

Labor's first NSW budget in 13 years will walk a tightrope, battling a once-in-a-generation living costs crisis while promising higher spending on essential services and trying to avoid crippling future debt.

Urgent demands for short-term relief on energy bills, travel costs and housing will be matched with a pledge to lay the foundations for long-term reform after more than a decade consigned to the opposition benches.

Treasurer Daniel Mookhey will unveil his first budget on Tuesday and he says it will be a template for how state governments can look after essential services like schools and hospitals in a responsible way.

But he is already managing public expectations about how quickly people can start to see the impacts of Labor's planned changes.

"Not every problem will be fixed overnight, but what people will see is this government showing respect to the essential workers who provide services the community relies upon," he told AAP.

"People want more and people need more from our essential services, but we are striking a very careful balance here."

That careful balance is being driven by the need to manage the state's growing debt burden, which is set to hit $187 billion by 2025/26.

The treasurer is staring down that fiscal cliff while also trying to find money for $7 billion in unfunded programs Labor says have been inherited from the previous coalition government.

"If we're prepared to borrow money from our children and our grandchildren, we've got to be sure that we're spending it on projects that build the state for the future," he said.

While preparing the budget, Mr Mookhey was acutely aware of rising interest rates and their impact on the ability of both the government and ordinary households to balance the books.

"I see our job as balancing carefully the need to look after families during a once-in-a-generation cost-of-living crisis at the same time as we fix the fundamentals that created it," he said. 

"What people are looking for is a government that is prepared to think a bit long-term and isn't just interested in short-term solutions to deep-seated problems."

Big-ticket spending already announced has included a large pay rise for teachers, upgrades to public schools and hospitals, and subsidies to entice more health care students.

The housing crisis poses a complex challenge, with a need to increase supply in the long-term to be paired with improving renters' rights and systems to support an increase in accommodation in the short-term.

"It's going to take time, NSW has not hit its housing supply growth targets for more than seven years and you can't turn a ship like that around overnight," Mr Mookhey said.

But the treasurer was giving little away about the cost of one of the government's most controversial decisions, the likely extension of the life of Australia's largest coal-fired power station.

The government announced it would explore extending the life of Eraring, near the shore of Lake Macquarie, past 2025 alongside $800 million in extra budget funding to help connect renewable energy zones to the grid.

Mr Mookhey said the government was trying to "undo the damage" caused by the privatisation of public services in the past decade, including the O'Farrell Liberal government's $50 million sale of Eraring in 2013.

As for whether NSW residents would personally feel any better off after his first budget, the treasurer said people would get help where they needed it. 

"Some of the most important things we'll be doing will be helping people with the cost of tolls," he said.

"What people will see is us lay the foundations of reform that will be delivered over the long-term, designed to ensure people can afford to turn on the power, to travel around the state and have a roof over their heads."