A "major shake-up" is on the way as to how NSW invests public money in a move that seeks to cut its ballooning debt by more than $7 billion.
Treasurer Daniel Mookhey said the management overhaul of NSW’s $108 billion in investment funds would likely see interest payments drop $1.1 billion over four years.
He is under pressure to find ways to bolster the state's flagging finances after earlier this year admitting the state government faced billions of dollars in “difficult to avoid” pain-points.
Mr Mookhey said the financial revamp would be the biggest debt-reduction proposal contained in the 2023/24 budget, which is set to be handed down on September 19.
It marked the end of the prior government's policy of using borrowed money to invest in financial markets and other assets, he said.
As part of the process, Labor will this year suspend contributions to the NSW Generations Fund - a sovereign wealth fund set up by the former coalition government.
It would also make TCorp - the state's financial management and investment arm - conduct an overhaul of its funds to maximise returns for the state, the treasurer said.
He said the TCorp shake-up would lead to six government funds worth $43 billion being consolidated into a more cost-effective structure.
"The government’s new funds management strategy will be implemented in next year’s budget," Mr Mookhey said.
The NSW Generations Fund, which comprises the Debt Retirement Fund and the Community Services and Facilities Fund, was meant to grow over time to ease the debt burden on future generations.
But the Minns government has previously said it views the approach as not fit for purpose in the current environment of high interest rates.
