TransGrid sale boosts NSW budget forecast

Sydney's booming property market and the sale of NSW's biggest electricity network have put the government on track to post a $3.4 billion budget surplus.

The budget result for 2015-16 is forecast to be $875.7 million higher than predicted in the June budget, the government's half-yearly review revealed on Thursday.

The improvement was largely due to a one-off $438 million transfer duty payment from last month's sale of poles and wires business TransGrid, the first of three valuable electricity assets to be sold off.

The stamp duty payment from the sale, which was confirmed to have been completed on Wednesday, saw transfer duty revenue for 2015-16 climb to $863 million higher than expected in the June budget.

NSW is nearly debt free for the first time in two decades, with the state's net debt position shrinking from $8 billion to $1.8 billion in June 2016, Treasurer Gladys Berejiklian said.

But the state's debt-free days aren't expected to last.

A cooling property market and the federal government's decision to cut health and education payments from 2017 will put pressure on the state's coffers.

"There's no doubt there will be a challenge for us to ensure our revenue growth is greater than our expenses growth," Ms Berejiklian said.

"But we've made sure we've factored all that in to our forecasts".

Shadow Treasurer Michael Daley argued the government was not prepared for the challenges, with the budget being propped up by "ridiculously high" property prices in Sydney.

The federal cuts were also "a slow-moving train wreck coming at NSW", he said.

The half-yearly budget update revealed surpluses were expected to average $2.6 billion over the next four years.

With the government planning to spend much of its power privatisation revenue on promised infrastructure, Ms Berejiklian said the government would be keeping a "close eye" on spending for such projects.

A forecast decline in NSW's GST revenue, as well as declines in mining royalties, are also expected to hit the bottom line in the future, she said.

The state government would also not reform state taxes such as stamp duty until federal tax reforms have been completed.

"We are willing to look at our own tax base and how we can do things better once we have a better picture of where the federal tax reform agenda is," Ms Berejiklian said.