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The NSW economy will grow less than expected next financial year amid rising inflation and the global oil shock, the state's treasurer will warn ahead of next month's budget.

In a speech today ahead of the 23 June state budget, Daniel Mookhey will warn that NSW will only avoid a recession in 2026-27 because of the number of renewable energy projects now under construction in the state.

Attentive budget watchers will notice a slowdown more pronounced in NSW than elsewhere in the federation. The simple reason is that higher inflation has led to higher interest rates which is lowering consumption spending; the point of the [Reserve Bank of Australia's] increased interest rates. But the more complicated explanation is this: higher interest rates hurt working Australians in every state, but they hurt working Australians more in this state.