Public sector workers across NSW are cheering the state government's removal of wage caps, but the move could threaten Labor's budget forecasts.
The Minns Labor government has received mixed reviews on its first budget handed down on Tuesday.
Conservationists criticised a lack of environmental spending while housing affordability advocates said funding allocated to the sector would barely scratch the surface of what was needed.
Treasurer Daniel Mookhey predicted a deficit of $7.8 billion in 2023/24 before the delivery of a modest surplus of $844 million in 2024/25 for Australia's most populous state.
But at least one credit ratings agency has urged caution over the figures.
Moody's Investors Service questioned the government's projection of an annual expenditure growth of 0.8 per cent over the four years to 2027.
"We expect this will be difficult to achieve given persistent inflation pressures, the recent removal of the wage increase cap and new operating expenditure initiatives such as increased essential services staff and health expenditures, and cost of living and housing support measures," it said in a report on Tuesday.
Promised increases in recurrent spending include making 16,000 casual teaching and administration staff permanent, removing public sector wage caps, additional health expenditures and ongoing cost of living support measures.
Yet Education Minister Prue Car said the government was reprioritising money to pay for wage increases needed to ensure a stable workforce.
"This Labor budget is all about delivering repair to essential services," Ms Car said during Question Time on Wednesday.
"We are addressing once and for all the chronic teacher shortage crisis that we face in all sectors in NSW."
Opposition Leader Mark Speakman said wage increases would be funded with cuts to the budgets of essential services.
Taking inflation into account, Mr Speakman said health, education, police and TAFE would suffer cuts in real terms.
"This is a government that said was going to rebuild essential services instead it is ripping essential services apart," he said.
Homelessness NSW said a $224 million package for social and emergency housing "amounted to crumbs" and would barely scratch the surface of the state's homelessness crisis.
Domestic violence advocates said many women and children in abusive homes can't afford rent on their own, even with rental subsidies or income support.
Women's Community Shelters CEO Annabelle Daniel said $4.4 million over three years to establish a new multicultural domestic violence centre in southwest Sydney doesn't go far enough to protect many, primarily women, who remain at risk.
"It's a start but it doesn't solve the ongoing increasing demand for safe and affordable housing for those struggling with domestic violence and homelessness,'' she said.
Premier Chris Minns acknowledged the government could only do so much when it came to building houses, but said removing red tape and funding infrastructure such as roads, schools and hospitals in emerging suburbs would encourage investment.
Other risks to the surplus highlighted in the budget papers include the lagging impact of higher interest rates, uncertainty over inflation and possible disasters driven by climate change.
Nature Conservation Council NSW chief executive Dr Brad Smith said while the budget forecast a surplus, the climate and environmental deficit continued to soar.
"Given the scale of the environmental crisis we're in, spending 1.67 per cent of the budget on the environment is inadequate," he said.
Funding for the planned Great Koala National Park also fell short of what some were hoping for, with $28.5 million set aside over four years despite an $80 million commitment.