The Aboriginal flag is to be given a permanent place of honour atop the Sydney Harbour Bridge.

The NSW government is committing $25 million to install a third flagpole by the end of the year, with NSW Premier Dominic Perrottet saying the gesture represented another step on the road to reconciliation.

“Our Indigenous history should be celebrated and acknowledged so young Australians understand the rich and enduring culture that we have here with our past,” Mr Perrottet said in a statement on Sunday.

“Installing the Aboriginal flag permanently on the Sydney Harbour Bridge will do just that and is a continuation of the healing process as part of the broader move towards reconciliation.”

The flagpoles are about 20 metres high, the same as a six-storey building, while the flags require an attachment strong enough to withstand all weather conditions.

Transport for NSW and Aboriginal Affairs will engage with key Aboriginal stakeholders about the project.

Meanwhile, the state government has also committed $37.9 million to improve before and after school care services and $206 million towards a sustainable farming program.

NSW Treasurer Matt Kean said the landmark program would reward farmers who voluntarily reduce their carbon emissions and protect biodiversity.

The Perrotet government is due to hand down its 2022-23 state budget this week.

Mr Perrottet, Treasurer Matt Kean and Planning Minister Anthony Roberts will make a budget announcement in northwest Sydney later on Sunday morning.

-with AAP