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SYDNEY, Dec 20 AAP

December 20 2012, 7:25PM

NSW Treasurer Mike Baird has compared managing the state's finances to walking a tightrope and is refusing to rule out tax increases, after a mid-year review found the budget would be in deficit a year longer than expected.

NSW Treasurer Mike Baird on Thursday released the half-year statement, which found the June budget's surplus of $289 million for 2013/14 was now predicted to be a $423 million deficit.

The update confirmed the auditor-general's October finding that the state was in surplus by $680 million in 2011/12, after a forecast deficit of $337 million in the June budget.

The 2012/13 deficit improved slightly from earlier in the year, down from $824 million to $776 million.

But the state's budget would return to surplus stronger than Mr Baird had forecast in June, up from $562 million to $1.367 billion in 2014/15, and from $1.172 billion to $1.758 billion in 2015/16.

Mr Baird said the state would be in deficit a year longer than forecast because of a drop in commonwealth revenues and mining royalties.

The deferral of federal roads grants would see $550 million lost in 2013-14, while sharp falls in coal prices meant mining royalties would be $1.9 billion less than forecast over the next four years.

Mr Baird said despite billions in public sector cuts and savings "we are still really at a break-even position", adding that managing the state's infrastructure and other needs with the budget bottom line was a "tightrope".

Questioned about the possibility of future tax rises, Mr Baird said "everything is on the table".

"We're starting to get back to a sustainable position," he said.

"But when you have the challenges we have, obviously debt needs to be paid back, infrastructure needs to be built. Revenue has fallen $2.5 billion a year."

The release of the half-year figures comes just over a month after an embarrassing report from the auditor-general found the state's position was $1 billion better off than reported in the June budget.

Auditor-General Peter Achterstraat uncovered 37 errors - including data entry and accounting mistakes - which contributed to the $1 billion turnaround in the 2011/12 accounts.

The report forced Mr Baird to involve Mr Achterstraat in reviewing the half-year figures, and on Thursday the treasurer announced former federal and International Monetary Fund bureaucrat Maryanne Mrakovcic had been appointed to fix the financial statements.

Mr Baird also released details of the 37 mistakes identified by Mr Achterstraat, after refusing to do so at a budget estimates hearing a month ago.

His own Treasury department was responsible for nine errors - the greatest number of mistakes - including the $1.7 billion undervaluation of the Snowy Hydro.

Shadow treasurer Michael Daley said Mr Baird was "the most incompetent person in the O'Farrell government when it comes to handling the state's finances", and questioned when the NSW budget would be back in surplus.

"I don't think Mike Baird knows what he wants to do," Mr Daley said.

"He's got a very simple philosophy and that's just cut and slash and maim departments. Cut services. He wouldn't know if he was in surplus frankly unless the auditor general told him."