Laws slashing the amount of money unions are allowed to spend on NSW state election campaigns are unconstitutional and at odds with freedom of political communication, the High Court has found.

The laws cut the amount unions and other third party campaigners could put towards funding state election campaigns from $1.2 million to $500,000 and imposed prison terms for breaches.

At the same time the laws increased the amount political parties could spend on campaigns to $11 million.

The NSW Government had argued the laws were justified, in part to limit the influence of large sums on the electoral process.

The Government said the laws would prevent voices from being drowned out by big spends from third-party campaigners.

But the unanimous decision by the full bench of the court held that while the Government's propose was legitimate, the laws put an impermissible burden on constitutionally implied freedom of political communication.

It comes just weeks from the NSW state election, which will be held on March 23.

The decision potentially gives a massive boost to the union movement's war chest as it goes into the state election campaign.

The secretary of Unions NSW, Mark Morey, said the decision was significant.

"The union movement has always pooled its resources collectively, taking small amounts from all its members to get its message across so this now allows us to do our work effectively," Mr Morey said.

He said the laws had been designed to muzzle the union movement and other third party campaigners who wanted to speak out against the Government.

"What the High Court has said is that a government cannot rig an election, cannot silence its critics in NSW by simply passing legislation in NSW."

Treasurer Dominic Perrottet said the High Court's decision meant unions would be able to "disproportionately dominate" the election campaign.

"This decision means unions will now have the ability to exercise free rein on spending their member's due — without giving them a say — on wall-to-wall advertising during the NSW election campaign," Mr Perrottet said in a statement.

"The Government believes elections should be free and fair, not bought with out-of-control spending by unions and other third parties."