Premier Gladys Berejiklian and WestConnex Minister Stuart Ayres announce the rebate on Monday. Credit:Daniel Munoz Announcing the rebate on Monday, Ms Berejiklian hesitated at revealing the estimated hit to the state budget of the scheme but when pressed said it could be up to $100 million in the first year. "It could be more than that amount into the future. This is a growing cost to government but we know we can afford it," she said. "We will be able to tell you a bit more once this first year is finished because we know this could affect people's behaviour." The government has been under attack from Labor over the reintroduction of tolls on a widened section of the M4 motorway between Homebush and Parramatta.

The rego rebate will apply to all of Sydney's toll roads. Credit:Rob Homer Labor leader Luke Foley described the rebate as a "half-baked policy" that was another victory for toll road operators and left taxpayers to foot the bill. "What we see is a toll policy from this government charging western Sydney motorists $2000 a year to travel on the M4, and most motorists might get back $300 a year," he said. "The unfair tolls remain and what people will get back is a very small fraction of what they are forking out in high, unaffordable tolls." But Ms Berejiklian said the rego rebate could "bring back people onto roads they haven't previously used".

"We know this a behaviour shifter so therefore we need to make sure we have accommodated for that," she said. She rejected suggestions it would discourage people from using public transport, saying the state would not be spending $20 billion on new metro train line if "we didn't believe in public transport". Greens transport spokeswoman Mehreen Faruqi accused the government of using the lure of free registration to prop up the profits of private toll road operators. "This is effectively hundreds of millions of dollars of taxpayers' money in foregone revenue," she said. "If this government is serious about addressing the cost of living, they should be capping tolls and making sure people have real and affordable alternatives."

The scheme is reminiscent of the M5 cashback scheme introduced by the Carr Labor government in the late 1990s. The cost to the NSW taxpayer of refunding motorists who drive on the M5 South West has surpassed $1.5 billion and threatens to top another billion dollars over the next 10 years as refunds to motorists for tolls surge. But Martin Locke, an adjunct professor at Sydney University and former investment banker and infrastructure adviser, said the latest rego scheme was a step in the right direction towards a more equitable system of road-user charging. "Infrastructure Australia is saying the funding model needs to change to have people pay for actual road usage rather than through fuel excise and registration. However, you have to recognise that some people are going to be financially worse off and those people will receive assistance through the offset against the registration," he said. "You have to take baby steps on road-user charging because politically it is a difficult area. And the rebate is effectively capped – unlike cashback on the M5."

The latest scheme will apply to private drivers who use any of Sydney's existing toll road, and any new ones built such as the $16.7 billion WestConnex motorway or the F6 Extension in the city's south. Loading It comes as the government embarks on the sale of a 51 per cent stake in WestConnex, and commits to building the "Beaches Link" tunnel to Sydney's north east, and the F6 extension, both of which will be tolled. A NSW legislative committee inquiry into tolls last month also recommended that the state government investigate a network-wide cap on charges for Sydney's growing labyrinth of toll roads.