NSW public sector workers will get a 3 per cent pay rise in the state budget but it may not be enough to stop further industrial action.

Premier Dominic Perrottet flagged a 3 per cent wages boost for the next financial year with another 3.5 per cent the following year, depending on productivity gains.

The wage rise, above the 2.5 per cent cap imposed in 2011, comes after a swathe of recent industrial action and strikes from teachers, nurses, paramedics and other government workers.

However, a threatened strike from the Public Service Association is likely to go ahead on Wednesday. Unions argue that inflation means public sector workers’ wages are going backwards.

Mr Perrottet had forecast lifting the wage cap but warned it was unlikely to appease unions.

Teachers Federation NSW president Angelo Gavrielatos said the announcement “adds insult to injury”.

With inflation running at 5.1 per cent, the wage rise was a pay cut in real terms, he said.

PSA general secretary Stewart Little was in “furious agreement”.

The PSA’s central council will decide on Monday afternoon whether to proceed with the strike. But Mr Little warned it was unlikely the offer would stop public service workers walking off the job.

Unions say the wage cap should be scrapped, or lifted to at least keep up with currently surging inflation.

The wage cap has been in place for a period when inflation was mostly lower than 2.5 per cent.

NSW Treasurer Matt Kean said the increase in wages was fair and sustainable in the current economic climate.

Unemployment was as its lowest on record and maintaining competitive wages would retain talent, while expected economic growth would pay for the increase, Mr Kean said.

Opposition Leader Chris Minns said lifting the wage cap was “better than nothing”.

“We still believe the current system of bargaining between public sector workers and the NSW government is fundamentally broken,” he said.

“This confrontational approach that prioritises lawyers fighting it over in the industrial courts is not the way to go,” he said.

Existing frontline health workers will also receive a one-off $3000 payment in recognition of their efforts during the pandemic, Mr Perrottet said.

The payment does not cover departmental health staff like those that traced the spread of coronavirus, and Mr Little said the public service and other frontline workers would find it insulting that they would not receive a similar payment.

The NSW Nurses and Midwives Association’s acting general secretary Michael Whaites said the payment would be a welcome relief but was not a long term solution.

“This isn’t going to help them with their cost of living pressures in two weeks time, or in two months time,” he said.

The government has also announced plans to recruit 10,148 full-time equivalent staff to hospitals and health services across the state, as well as more than 1800 new paramedics.

Health Minister Brad Hazzard said the $4.5 billion investment over four years was intended to relieve pressure on existing staff.

Mr Minns said the government had recruited half of the nurses it promised at the 2019 election and would also face challenges recruiting more staff amid a tight labour market.

Mr Whaites said recruiting additional nurses should not be challenging, noting there were close to 20,000 nurses and midwives who were registered but not practising.

“It’s a furphy to say they won’t be able to recruit the numbers. Actually they won’t be able to retain the numbers if they don’t do something about the day-to-day workloads,” he said.

Union members would cal for further industrial action if the government did not address nurse-to-patient ratios, he said.