Resourcefulness and a never-say-die attitude will be needed by many of those who are currently employed, as five thousand public service employment contracts will be terminated over the next four years in NSW.

Under an $8 billion savings drive by the NSW government, the 5,000 jobs should be trimmed as part of its efforts to rebuild the state after serious revenue losses. Workers in the public sector and government projects will be affected.

The Treasurer, Mike Baird, announced the budget was forecast to move into the red this financial year with a $718 million deficit. This is largely due to a significant collapse in government revenues, estimated to have dropped harshly by over $900 million since March.

But the budget is forecast to return to a "modest" $292 million surplus in 2012-13, continuing across the forward estimates to 2014-15.

"We were elected to rebuild NSW and that is exactly what we are going to do," Baird told Parliament on Tuesday.

"Rebuilding NSW means repairing what was left behind, improving services and rebuilding the infrastructure we so desperately need."

Mr Baird said they would be offered "primarily to reduce the number of head office and backroom positions in non-service delivery areas". He said "further reductions are also likely to occur through normal staff turnover and natural attrition".

Port Botany will be privatized as part of the $8 billion budget sourcing plan, as deal proceeds will be used to do a necessary upgrade on the Pacific Highway.

NSW is also set to drive the residential construction market by restricting the existing stamp duty exemption for first-home buyers to newly constructed homes from Jan. 1, 2012. Full exemption will be given to new home buyers of properties costing up to $500,000, while a partial exemption will be granted to buyers of homes worth between $500,000 and $600,000.

The announcement is expected to meet more protests from public sector unions, amid protest plans on Thursday to express discontent over the cuts and the government's policy of capping public sector wage rises to 2.5 per cent unless savings can be found.

The wages policy is expected to save the government $2 billion over four years.

In other savings measures, $800 million is expected to be saved by reviewing existing government programs, while a 1.5 per cent efficiency dividend will be imposed on government departments.

Directors-general and other agency heads have been seriously notified that they must stay within their budgets. More than $1 billion is anticipated from procurement savings including across government contracts, travel and advertising.

Baird said "tough decisions" were required to "turn this state around".

"Fixing the problems we inherited will take time," Baird said. "It will not be achieved in a single budget. We look forward to being judged on our record, not our words."

The forecast for gross state product in 2011-12 has been sliced by a full percentage point to 2.5 per cent. Employment growth, which grew by a healthy 3.1 per cent last financial year, is forecast to slow to 1 per cent in 2011-12.

The state government will spend just under $60 billion on its operations this financial year and $6.7 billion on infrastructure.

The economic slowdown has heavily affected important sources of state revenue, especially GST and stamp duty, which contributed to the swelling of the deficit to $718 million this financial year. Still, stronger gross state product of 3 per cent forecast in 2012-13 will bolster a forecast comeback to budget surplus.