​On 13 September 1994 the Premier, the Hon J Fahey MP, and the Treasurer, the Hon P Collins MP, announced that NSW is to become the first Australian State to introduce legislation to guarantee a balanced budget. It was said that the legislation would be "enshrined in a referendum" to coincide with the March 1995 election. It is reported that voters will be asked to support a change to the NSW Constitution to ensure a debt-free annual balance sheet by 1997. It seems that not only would the Budget have to be balanced under the proposed scheme, but forward estimates contained in it would also have to show balanced Budgets into the future. According to the Premier, this would be based on certificates given by the Treasurer and the Secretary of the Treasury indicating it is within proper accounting procedures, otherwise the Budget appropriation bill "will not be valid or passed". Budget deficits would be permitted but only in exceptional circumstances, such as natural disasters and other "emergencies". The Treasurer elaborated, "Obviously in balanced-Budget legislation, you have to have provision for unforeseen consequences; natural disasters for example, major cyclical changes and as American States mostly provide, a stipulation in balanced legislation that should there be an overrun, that there will be a recovery in a specified period of time". In support of the proposal it was also pointed out that every State but two in the US has balanced budget legislation.

 This briefing note looks first at certain constitutional considerations arising from the proposal and secondly at some of its economic implications.