A 10.5 per cent pay rise over three years for public sector workers was among the "must-haves" written into the 2024/25 state budget focused on essentials, not cost-of-living handouts.
But the projected wage rise, which includes a mandatory increase in superannuation payments, falls well short of several key unions' demands.
The NSW government's wage offer comes as Treasury forecasts rising consumer prices in Sydney. (Darren England/AAP PHOTOS)
Treasurer Daniel Mookhey on Wednesday dismissed concerns about the higher demands for workers following on from his second budget, which includes a projected $3.6 billion deficit in the coming financial year followed by further shortfalls.
"The baseline offer, particularly when you include last year's 4.5 per cent (rise), is the fairest and best offer that any state government has made in the country and equally the best offer that's been made to the NSW public service in more than a decade," he said.
"(It) also has been paired with the reintroduction of an independent umpire which (parties) can use should we find ourselves in a position where we can't reach agreement."
Standing outside a studio apartment block being built in Sydney's east for older, culturally diverse women in need of social housing, Mr Mookhey said investment was concurrent with state debt and projected deficits being reduced.
"(It) shows that we're getting the balance right between making the investments NSW needs to have today as we set NSW up for a brighter future," he said.
Daniel Hunter, head of the state's peak business organisation Business NSW, credited the Labor government for avoiding inflation-surging measures as it collected higher-than-expected revenue.
"However, the decision to grant significant public service wage increases - the largest in more than a decade - has also hit the budget bottom line," he said.
The government's wage offer comes as Treasury forecasts consumer prices in Sydney will rise by more than eight per cent over the next three years.
In light of recent teacher and nurse wage deals, firefighters want 20 per cent over three years while police are sidling up for 25 per cent over four years.
"We will not settle for anything less because that is what you deserve," the police union has told members.
Revenue gains have been spent on union wage deals, Opposition Leader Mark Speakman says. (Dean Lewins/AAP PHOTOS)
The opposition, which placed a ceiling on public sector wages when in government, said expenditure outside wage rises had fallen.
"This government promised ... that union wage deals wouldn't cost a cent - it would all be funded from productivity offsets," Opposition Leader Mark Speakman said.
"Instead, we are seeing the revenue gains that this government has made in the last 12 months spent on union wage deals, rather than on hospitals, schools and other infrastructure."
Unions NSW Mark Morey suggested the coalition's wage cap had created "deep worker shortages" and going back would mean classrooms without teachers and hospitals without health workers.
"That was the experience of the last decade and that is what we will return to if the Liberals and Nationals achieve their wish," he said.
The NSW treasurer said wage growth would be funded through an existing essential service fund and productivity gains.
He also pointed to lower teacher vacancies and record nurse and police intakes as proof wage growth was an antidote to worker shortages.
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