A NSW Coalition government would set up a $5 billion infrastructure fund to pay for big transport projects and extend stamp duty exemptions for older people, Opposition Leader Barry O'Farrell says.

In his budget reply speech today, Mr O'Farrell pledged the fund, to be called Restart NSW, would be used to build major projects across the state.

The fund would be created from an estimated $1.2 billion to be reaped from a 25-year lease on the state's desalination plant, windfall revenues, as well as borrowing and government bond issuance, he added.

Spending priorities would be determined by Infrastructure NSW, a new body flagged by Mr O'Farrell this year.

"Through our proposal of Restart NSW we'll rapidly move to build or upgrade infrastructure including public transport, road infrastructure ... economic infrastructure to address the economic competitiveness of NSW ... hospitals and health infrastructure, and improvements to workplaces for frontline workers," he told State Parliament.