Tens of thousands of Sydney bus rides were cancelled in a single month last year due to a financial incentive to ditch services that run late.
New NSW Transport Minister Jo Haylen says what she has learned since taking over the portfolio has been "truly shocking".
"It's very clear that there are profound problems across our public transport network," Ms Haylen told reporters on Wednesday.
Under existing contracts, bus operators face penalties for cancelling and running services late.
However, there is a cap on how many fines operators accumulate for cancelling buses.
It means bus operators are incentivised to cancel late services, in preference to running them behind schedule.
Last August, 28,000 Sydney bus services were cancelled, Ms Haylen said.
That equates to about half a million people left waiting for a bus, if each of those buses was half full.
The issue had badly affected services in Sydney, but was also a problem in regional NSW, she said.
"Our buses are failing again, and again," she said.
"The former Liberal government's determination to sell off public assets has resulted in a system that is failing passengers."
Urgent legal advice has been sought from the transport department to ensure services are being delivered to commuters.
Contracts with bus operators, some which extend up to ten years, would be honoured, Ms Haylen said.
"I want to be upfront with the passengers and the people of NSW because they deserve to know what's really going on," she said.
"The previous government did not take that advice and that resulted in thousands of people being left on the side of the road."
