Next Sydney tunnel to burrow below harbour

Taking Sydney's $5 billion second harbour tunnel underground will deliver economic and environmental benefits, the NSW government says.

The decision to burrow the Western Harbour Tunnel under the sea floor, rather than dropping the tunnel onto it, was revealed on Thursday.

"It's going to reduce the cost, it's more effective for the taxpayers of NSW," Metropolitan Roads Minister Natalie Ward told reporters.

"The environmental upside is there is no dredging of the harbour, the immersive technology is not needed.

"The tunnel boring machines have advanced, particularly through this government's projects."

The six-lane tunnel, running from Waverton in the north to Birchgrove in the inner west, will connect the city's north shore to the inner west, removing the necessity for road traffic to pass through the CBD.

Flagged in 2018 to be open within six years, construction of the tunnel now won't begin until late 2023 and is expected to take five years.

Commuters will be hit with tolls but Ms Ward couldn't provide an exact figure on Thursday.

The project will provide 6900 jobs, the government said.

Acciona, which will construct the tunnel and the connection to the Warringah Freeway at a cost of $4.24 billion, said its methods meant 87 per cent less carbon, 73 per cent less concrete and 25 per cent less steel would be used, compared to the base case.

"It's the biggest collaborative contract in Australia that has been signed," Acciona Australia chief executive Bede Noonan said.

"That's the new sign of partnering for our industry with government. It's a great example of what we can achieve together."

The tunnel will be the third harbour road crossing after the Harbour Bridge and the Harbour Tunnel, which opened in 1992 and sits on the harbour floor.

It will connect to $722m tunnels under construction between Rozelle to Birchgrove, bringing the project's total cost to $4.96 billion.

Premier Dominic Perrottet said the latest tunnel created "the transport trifecta of Sydney Harbour".

"I know it will make a real difference to people's lives across our city and state," he said.

Once operational, the tunnel will cut up to 15 minutes when travelling from North Sydney to Sydney Kingsford Smith Airport, the government said.