Sydney commuters could pay more to catch trains and ferries from next year after the pricing regulator handed down its recommendations for ticket prices.
The Independent Pricing and Regulatory Tribunal (IPART) has recommended average maximum fare increases of up to 3.6 per cent for CityRail and 4.8 per cent for Sydney Ferries, from January 2013.
The NSW government had previously ruled out fare hikes above inflation without a "demonstrable" improvement in services.
"We're not in the business of ratcheting up rail fares over and above CPI (consumer price index), when commuters get nothing in return," Premier Barry O'Farrell told reporters last month.
But IPART chairman Peter Boxall on Wednesday said that without real fare increases now, taxpayers would end up paying an extra $62 million over the next three years.
"We consider that taxpayers should fund a share of the efficient costs that is broadly equal to the value of the external benefits," he said in a statement.
"This value represents the level of taxpayer subsidy that can be justified on economic grounds."
The final determinations set fares for the next three years for CityRail and the next four years for Sydney Ferries.
Under the IPART determinations, CityRail fares would be allowed to increase by a further 3.8 per cent a year from 2014 to 2015 and Sydney Ferries fares by a further five per cent a year from 2014 to 2016.