The state's independent advisory body has urged the NSW government to reconsider a number of its infrastructure 'megaprojects', as rising costs put a question mark over their benefit to the state.
The new report, State Infrastructure Strategy 2022-2044: Staying Ahead, from Infrastructure NSW, calls on the government to balance its pipeline of large projects with small and medium-sized activities.
The report, released on Tuesday, also urges the government to reconsider the need for and timing of major road and rail development.
This includes the Beaches Link, the M6 Stage 2, stage two of the Parramatta Light Rail, the central tunnel of the Great Western Highway between Katoomba and Lithgow, further stages of the Sydney Metro and regional major dam projects.
The report urges the government to reconsider each large-scale project, and recommends creating a process for sequencing and prioritising projects, and diversifying sources of funding to firm up future delivery.
The government will also need to ensure there are enough construction workers to meet increasing demand, it says.
The report also calls on the government to diversify the state's water supply and includes five recommendations surrounding water.
Infrastructure Minister Rob Stokes said the state's $110 billion infrastructure pipeline would go on, but the government would look closely at the report's recommendations.
"That record infrastructure delivery will continue, but we must now consider the global challenges affecting us and the independent advice from Infrastructure NSW," Mr Stokes said.
"The report provides clear recommendations for us to diversify our infrastructure pipeline, consider more smaller projects while continuing to deliver city and state-shaping projects."
Chair of the Infrastructure NSW board Graham Bradley said the government should sustain its high investment in infrastructure while diversifying its pipeline.
"We need to find a balance between the megaprojects of the past decade and more small and medium-sized projects that can deliver great value and be more reliably delivered in a time of a tightening construction market," Mr Bradley said.
"A significant investment program in large and transformative projects will continue, with 155 large projects to be completed over the next decade."
The government also faces major and long term-challenges regarding water security and its sustainable use and allocation, Infrastructure NSW said.
"(The) NSW Government will need to increase rainfall-independent supply, better manage scarce water resources, and work closely with local councils to achieve increased water storage and recycled use," the report says.
In regional areas the government needs to encourage local investment that ensures all communities have access to quality water.
Infrastructure NSW made a total of 57 recommendations.