Drought and Sydney's softening housing market have been blamed for a slide in the NSW surplus forecast in the state government's half-yearly budget review.
A $1.1 billion surplus is now forecast for 2018/19 along with average surpluses of $1.3 billion over the forward estimates, NSW Treasurer Dominic Perrottet confirmed on Tuesday.
The government, when it handed down its budget in June, originally forecast a surplus for this financial year of $1.4 billion and average surpluses of $1.6 billion over four years.
Tuesday's budget review included extra funding for schools, emergency drought relief, additional police and infrastructure spending as the countdown begins to the state election in March.
The government has written down stamp duty revenue by $2.5 billion over the four years to 2021/22 following a slump in Sydney's property market.
"We've seen a significant softening," Mr Perrottet said on Tuesday, later adding he expects the city's housing slump to get worse before it gets better.
"We see the property market coming off a bit more, but then stabilising and then picking up in the future. We believe that is a conservative estimate."
The treasurer also weighed in on Australia's immigration debate saying it was "lazy economics" to think that allowing more people into the country was the only solution for continued economic growth.
Mr Perrottet said the federal government benefited from added income tax from higher immigration but it was left to states like NSW and Victoria to "pick up the tab" when it came to infrastructure.
"No one comes to Australia and wants to move to Adelaide," Mr Perrottet said.
"It's our role as a state to built the infrastructure and make sure, as our city and state grows, it grows well."
He conceded strong population growth had been a driver in NSW's economic growth and it was up to the states to grow with their populations.
Opposition leader Michael Daley took aim at the government's asset recycling program, which he argues is ripping off the people of NSW.
Mr Daley said $12 billion of the $70 billion worth of government assets that had been privatised had been lost on cost blowouts.
"You cannot claim to be good economic managers if that sacrosanct pot of money that you hold in trust of the people of NSW is wasted," the Labor leader said.
The NSW budget update comes a day after the federal government's mid-year economic and fiscal outlook showed it's on track for a $4.1 billion surplus in 2019/20 - almost double the $2.2 billion figure it had forecast in May.
Australian Associated Press