The announcement NSW's last major port is being sold-off by the state government has sparked claims from Labor it will devastate the people of Newcastle.
But NSW Treasurer Mike Baird insists the growth hub north of Sydney will be "the big winner" from the long-term lease on the city's port facilities.
Newcastle will get $340 million to "revitalise the city" from the port's privatisation, although Mr Baird denied the funding package was a sweetener.
"It will effectively be the rebirth of Newcastle as a modern city," he said after delivering his third budget on Tuesday.
NSW Opposition Leader John Robertson said the port was a revenue-generating asset that belonged to the people of the Hunter.
"The sale is absurd. Most people in Newcastle I imagine will be devastated," he told reporters.
The government will immediately proceed to a scoping study on offering a 99-year lease on the Port of Newcastle, which is the largest port in the world.
Mr Baird said the government hoped to get up to $700 million following "interest around the world".
"It is clearly a highly prized asset, that is the reason we have taken action today," he told reporters.
"We must act on that unique opportunity that sits there."
If the transaction is successful, $340 million of the proceeds will go towards removing the heavy rail line between Wickham and Civic so that Newcastle is no longer divided from the harbour-front.
It will also deliver light rail in the CBD, providing the potential basis for a wider light rail service linking the CBD with surrounding suburbs and beaches.
"The community's voice has been heard loud and clear and the government intends that Newcastle's heart will be rejuvenated through the stimulus of a new light rail package," said NSW Planning Minister Brad Hazzard.
Mr Baird said the government had decided to proceed with the lease after netting $5 billion to spend on infrastructure after privatising Port Botany in 2011 and Port Kembla in 2012.
"The recent transaction involving Botany and Kembla was the largest, in net terms, in the state's history," he said.