Budget worse than expected - Rees

NEW South Wales Premier Nathan Rees says the economic outlook for the state is more bleak than he expected, and difficult decisions will have to be made.

Mr Rees today received his second economic briefing since being installed as premier yesterday afternoon, during an unprecedented day in state politics.

Dumped treasurer Michael Costa yesterday painted a grim picture of the economic situation in NSW, saying the state's AAA credit rating was at risk.

Mr Rees today confirmed the health budget had blown out by more than $300 million, and said cutbacks in areas such as capital works would be necessary.

When asked if the situation was better or worse than he had expected, Mr Rees told reporters: "Worse, clearly."

"Like a household, you need a level of income sufficient to service your mortgage or your rent," he said.

"At this point in time there is a threat to our income levels and that means that if you are looking at us from the outside as a ratings agency, they are looking at us as a family that may not be able to continue paying its mortgage.

"We're going to fix that ... in the mini-Budget."

Mr Rees said there would be no silver bullet in terms of averting an economic crisis.

"There will be a number of difficult decision that have to be made across the Budget, capital works programs may have to be delayed," he said.

He would not be drawn on what measures would be included in the mini-Budget, which he said would be out in 10 weeks at the latest.

"There are difficult decision to be made, I want to make those decisions quickly and send the right signals to the investors, send the right signals to the financial market and make sure we can get cracking on the capital works program that enables us to put hospitals, rail lines and schools and so on on the ground as quick as we possibly can," he said.

He admitted it was not "the ideal start" to his time as premier.

Quote: Stop building prisons, find ways of diverting people from prison, and stop locking people up for longer. How much money would that save the state? About a billion at least. Otherwise the greatest crime will be people dying before they get to a hospital or even while they are there. Education also prevents crime the money spent on education even without specialist skils like social skills can prevent crime.

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