Private operators in NSW will be pushed to compete for funds in a bid to create tens of thousands of new childcare places where they are most needed.
Treasurer Matt Kean has unveiled "an absolute game changer" policy to address a lack of accessible and affordable child care that he says is "a huge barrier to women participating in the economy".
The state will spend $775 million over the next four years, but could fork out up to $5 billion in the next decade, dependent on future advice.
Mr Kean announced the policy at a briefing hosted by urban policy think tank Committee for Sydney on Tuesday, a week out from the budget on June 21.
It is projected to create an additional 47,000 childcare places annually, eventually saving families nearly $4000 a year for each child.
Premier Dominic Perrottet says the funding is a once-in-a-generation reform that needs a long-term view to drive women's participation in the workforce.
"Not just for today but for the next decade," he said.
"This is a complex area with many challenging and competing interests, but we need to make sure we have a long term horizon ... this is the biggest productivity reform the state can pursue," the premier said.
The money will establish a fund for childcare operators looking to expand.
"That will work hand in glove with the (commonwealth) government, who are focusing on the demand-side subsidy," Mr Kean said.
Operators will compete through an auction process to provide more places at affordable prices.
"If they want to propose ways that they're going to significantly decrease the cost of delivering care then they can compete for this money," he said.
Mr Kean hopes to push the market to provide affordable places in areas that are crying out for child care, rather than just allowing operators to expand to areas where they can make the most profit.
"What we want to do is make sure that we deliver the most affordable accessible child care anywhere in the country," he said.
The treasurer said the program will grow the economy by more than $17 billion a year.
"NSW has some of the most highly educated women anywhere on the planet," he said.
"Unleashing that creative, professional capacity will drive economic growth."
Mr Kean said some women who wanted to return to work were unable to find child care, or found it so expensive it was barely worthwhile, describing it as a women's tax on aspiration.
Women's workforce participation was lower than men's, their work was less secure, lower paid and they were more likely to be harassed while doing it.
"They are the result of divisive barriers that prevent women from having true freedom of choice over their lives," he said.
In addition to the fund for operators, some $281 million will be spent on scholarships and training to support the staff required for an expanding sector.
Early Learning Minister Sarah Mitchell said it was the biggest investment the state had ever made in childcare staff, 95 per cent of whom are women.
"This is a landmark day for NSW," she said.
The policy is projected to add another 18,000 workers to the industry, with grants of up to $25,000 available for people training to become childcare workers.
Women have been a focus of Mr Kean's first budget as treasurer, with other pre-June 21 announcements including funding for menopause treatment, women's return to work grants and plans to create more women's community centres and refuges.
