The NSW Labor government will redirect $13 billion in budget savings into its key priorities, as it forecasts a surprise surplus in the next financial year.

After years watching from opposition benches, the Minns government will hand down its first budget in more than a decade.

Treasury figures show the state will be in a $7.8 billion shortfall this financial year, $700 million more than expected before the election.

But in a surprising turnaround, the government is projecting a $800 million surplus in 2024/25 which will grow to $1.6 billion in 2025/26.

Premier Chris Minns promised Tuesday’s budget will be a “thoroughly Labor document” that his ministerial team are excited to hand down.

“The sky is the limit for economic opportunity and sustainable growth in the NSW economy, but we’ve got to get the fundamentals right,” he said on Monday.

“It’s a good document that will invest in the long-term future of this state.”

Treasurer Daniel Mookhey has pledged to make cuts to “wasteful” spending from the former coalition government, and will be under pressure to balance the books while funding Labor’s own big-ticket promises in areas like health and education.

Current projections show the state’s gross debt will hit $187 billion by 2025/26.

Multiple budget funding packages have already been announced, including big boosts for schools, health care, housing, transport and renewable energy projects.

Low-income households can expect to see energy bill relief from July next year, while three-quarters of a million motorists will benefit from a $60 a week toll cap come January.

A government promise to remove the public sector wage cap will cost $3.6 billion over four years and will be aimed at retaining and recruiting staff in areas of the public sector experiencing shortages.

The funding commitment will support long-term pay growth for nurses, paramedics, health workers, police, firefighters, prison officers, teachers and child-protection workers.

The cost of some of the government’s most controversial decisions, such as extending the life of the Eraring coal-fired power station, will also be under scrutiny.

An additional $800 million in budget funding has already been flagged to help connect renewable energy zones to the grid.

Royalties on coal mining will be hiked for the first time in nearly 15 years, which is expected to leave the budget more than $2.7 billion better off over four years.

The premier said he expected to sleep easy the night before the budget, confident the government had struck the right balance.

“(The budget) will invest in essential services, it will confront the housing crisis in this state, it will get our renewable energy revolution back on track and it will start to pay down debt that’s been accumulated over a 10-year period,” Minns said.

-AAP