The Minns Labor government has received mixed reviews on its first budget handed down on Tuesday.
Conservationists criticised a lack of environmental spending in the budget while housing affordability advocates said funding allocated to the sector would barely scratch the surface of what was needed.
Treasurer Daniel Moohkey 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.
"We're reprioritising state money, taxpayer's money, into the essential services that we all rely on via the workers that are in critical shortage," she told Sky News.
"How can we actually run an education system without enough teachers, how can we run a police system without enough cops and how can we run a hospital system without enough nurses?"
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.
Premier Chris Minns acknowledged the government could only do so much when it came to building houses and would rely on partnerships with the private sector to boost supply.
But he said removing red tape and funding infrastructure such as roads, schools and hospitals in emerging suburbs would encourage investment.
"We need to produce 75,000 (house) completions in NSW every 12 months but last year, we only did 48,000," he told Seven's Sunrise.
"We have to get the private sector, individual builders, construction firms and developers rolling in NSW, that is the only way to ease pressure at scale.
"(The government) is going to make an investment but I could double or triple that and it won't go anywhere near the buildings that we need for the future in NSW, it's got to be the private sector and that means clearing out a lot of the red tape."
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.
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