Mr Foley, who will deliver an economic statement on Friday, said the Government was looking at a modest deficit because of the financial turmoil's impact on the state's finances.

He said Friday's statement would contain measures to limit the size of the deficit by the end of the current financial year. ''We are facing a deficit,'' he told ABC radio yesterday. ''We have seen a substantial deterioration in the income we receive from both the Commonwealth through the GST [and] from our own source revenue and we are seeing a substantial slowdown in home construction and home sales. ... what I am hoping to do is to forecast a position where we will be returning to solid surpluses in the not too distant future.'' AAP