The NSW government is being urged to do more to tackle Sydney's housing affordability crisis after Canberra took only modest steps to address the problem in the federal budget.
In a bid to ease housing stress, federal Treasurer Scott Morrison on Tuesday announced first home buyers and older Australians would be able to use some voluntary superannuation contributions for a home deposit.
Foreign investors will be barred from accessing the main residence capital gains tax exemption when they sell a property while a $5000 levy will be imposed on those who fail to occupy or lease their property for at least six months.
The package has received cautious support from Australia's peak housing body Housing Industry Australia but welfare groups and NSW Labor argue the plan will hardly have an impact on Sydney's eye-watering house prices.
"To us in Sydney, it's really only tinkering around the edges and will have a minuscule impact for people on low to medium incomes, because they don't have much to put away in their super anyway," NSW Council of Social Service chief executive Tracy Howe told AAP on Wednesday.
The federal government should have reformed negative gearing, Ms Howe said.
"To leave that untouched means you have investors who have the capacity to jump over home buyers despite those other (policy) levers."
NSW shadow treasurer Ryan Park agreed.
"Before last night's budget, we had a housing affordability crisis (and) after last night's budget we still have a housing affordability crisis," he told reporters in Sydney.
The Labor MP also criticised Premier Gladys Berejiklian who in January claimed housing affordability was her top priority.
"(Ms) Berejiklian won't do that and as a result, first home buyers, particularly here in Sydney, will be worse off," he said.
The premier says housing affordability will be the centrepiece of her June 20 budget.
"I am looking forward to the budget process and announcing a package of reforms we're putting forward for that," she told parliament on Wednesday.
There was some good news for NSW in the federal budget with Canberra confirming it would spend $5.3 billion to build Western Sydney Airport.
But funds for a connecting rail link aren't guaranteed yet.
Mr Morrison said the airport link has the "potential to be supported" by the Turnbull government's new $10 billion national rail program for projects connecting cities and regions.
But it will have to compete against Adelaide's AdeLINK, Brisbane's Metro and Cross River Rail, and a link to Melbourne's Tullamarine Airport for federal cash.
Governments are also in talks about "Snowy 2.0", an expansion of the Snowy Hydro scheme, it was revealed on Tuesday night.
The federal budget papers put the infrastructure spend in NSW at $18 billion, including the new airport and ongoing initiatives such as the $2.9 billion joint Australian-NSW infrastructure plan for western Sydney.
