Senior treasury officials believe a state's bottom line will be billions of dollars worse off without reforming Australia's largest workers' compensation scheme.
But questions still surround changes NSW's Labor government is scrambling to establish before the end of June as it warns of steep insurance premium increases.
A parliamentary inquiry examined the bill on Tuesday, with NSW Treasury secretary Michael Coutts-Trotter warning the liability of the compensation scheme - protecting more than 3.6 million workers - would look $2.6 billion worse over five years in the June 26 state budget without reform.
"You've got billions of dollars on one hand, a moral imperative but relatively limited savings on the other, and there is a continuing problem with the sustainability of both the public and private scheme," he said.
The proposed laws would address a lack of focus on preventing mental injury, the low rate of recovery and return to work for such injuries, and stop a sharp rise in premiums, the government had argued.
Treasurer Daniel Mookhey has driven the reforms due to a surge in psychological payouts, arguing the current system could collapse if the number of claims in the pipeline was not reduced.
About $4.8 billion in premiums levied on businesses in 2024 only covered about 85 per cent of claims.
But the validity of that argument was questioned by some MPs after lower-house amendments limited the retrospectivity of the changes.
The amendment meant a new, higher threshold to lifetime weekly payments for mental injury would not apply to a worker notified of an injury before the laws are passed.
Opposition MP Damien Tudehope said he found the government agreeing to that amendment "perplexing".
Independent Mark Latham said it went against the treasurer's justification for the new laws: a pressing need to retrospectively deal with mental health claims putting the scheme's financial viability at risk.
"Without being able to tell this committee what was the actual cost, he's agreed to three different amendments ... to remove the retrospectivity and add to the problem," the ex-Labor and One Nation MP said.
While the government looked for savings to its compensation scheme, it announced it would spend a whopping $9 billion across four years on new, upgraded and refurbished schools.
"A reasonable person would say this is the largest spend in school infrastructure in the state's history," Premier Chris Minns said.
"We'd do it tomorrow if we could. We know families have been waiting a long time, but we are playing catch up. We're building what we should build today and what should have been built yesterday."
The government had hustled to pass its compensation reforms before the June budget, but the state's upper house voted to send the proposed changes to a committee.
