Dumped NSW Treasurer Michael Costa has delivered a scathing assessment of NSW's finances and says he has a strategy to fix them, but new Premier Nathan Rees will entrust that job to someone else.
Mr Rees, sworn in on Friday after Morris Iemma was rolled by his own Right faction, made it clear that there was no place for Mr Costa in his cabinet.
He called Mr Costa a "divisive influence" within the Labor government, but had some words of praise for his "fiscal integrity".
Ms Costa was the architect and most ardent backer of Mr Iemma's failed $25 billion electricity privatisation plan, which sparked deep divisions within the government and alienated the party's union support base.
"Michael's commitment to fiscal integrity is unquestioned," Mr Rees said at his first press conference as premier, on Friday.
"But knowing your stuff is only half your job in this game. You need to be able to bring people with you.
"I think he was a divisive influence."
At his own press conference earlier in the day, Mr Costa said he was ready to deliver a "very tough mini-budget," saying NSW was overcommitted in capital works spending and faced losing its AAA credit rating.
The loss of the AAA credit rating would add $500 million to NSW's interest costs over the next few years, he warned, and called for a "push out" in major projects to prevent the need for savage cuts to health and education budgets.
The $12 billion North West Metro rail link should be the first project to be delayed, Mr Costa said.
"We are seeing a collapse in our revenues as a result of the slowdown in the national economy," said Mr Costa, who before today's leadership spill was dumped by Mr Iemma as treasurer.
"Our stamp duty revenue ... is down approximately $90 million in the first two months - that's $180 million over the period.
"The reality is that's not a sustainable level of revenue to maintain our capital program."
He said RailCorp wanted a further $3 billion in capital works spending over the next few years, health spending was $300 million over budget, and the health capital works budget was also "overcommitted".
Mr Costa said ratings agency Standard & Poors had warned the state faced a rating downgrade if the rate of growth of NSW capital works spending was not slowed.
The ratings agencies would probe the scheduled November mini-budget and "tough decisions" were needed, he said.
"It doesn't matter if Michael Costa is the treasurer or someone else, we are facing a very tough mini-budget," Mr Costa said.
"I am prepared to deliver that mini budget ... we do face some tough decisions. Those decisions will have to be made irrespective of who sits in the treasurer's chair."
The decision on who will be the next treasurer will be decided at a caucus meeting on Sunday, where all cabinet positions will be filled.
"I am not going to speculate or comment on the make-up of the cabinet," Mr Rees said, "other than to say Michael Costa will not be returning to the cabinet."