Premier Gladys Berejiklian says the funding will prioritise infrastructure repair and help stimulate fire-ravaged NSW communities over the next two years.

It comes after the state government committed $231 million to disaster assistance and the federal government announced a $2 billion relief package.

"The NSW government will focus on rebuilding the communities, on that infrastructure which has either been damaged, destroyed or needs improvement," she told reporters in Sydney on Thursday.

"That can range from a bridge, to a road, to a rail line, to a school, a hospital, or it can also extend to communications and energy infrastructure as well."

The government will start with communities where fire threat has subsided.

Treasurer Dominic Perrottet said they had found the money in unallocated capital reserves across government.

Asked how ongoing bushfires and drought would impact the government's surplus forecast, Mr Perrottet said they were less focused on the budget.

"Our government's focus right now is to make sure we get communities and families back on their feet as quickly as possible," he said.

Richmond Valley Mayor Robert Mustow, whose region includes the small village of Rappville devastated by fire in October, welcomed the announcement and said every dollar of additional funding helped.

He said the community had lost roads, bridges and a community hall as well as homes, and a lot of people were still struggling.

"The infrastructure needs to be replaced as soon as possible because a lot of these communities are going to feel the impact for many years to come," Mr Mustow told AAP.

MidCoast Council Mayor David West said that if he had arms long enough, he would "hug the entire government for making a decision to come forward with a billion dollars".

"It's not so much the thanks for that, it's what we're going to do with it and how we're going to deliver it," Mr West told AAP.

He said his biggest concern was not the rebuild but the mental wellbeing of the people affected by bushfires.

NSW opposition leader Jodi McKay welcomed the assistance to fire-affected communities but said they faced problems bigger than physical infrastructure and also needed upgrades to health services.

The $231 million in disaster assistance funding already committed this season includes $25 million for the clean-up of damaged and destroyed homes, $6 million for extra mental health services and an extra $166 million to fight fires.

Ms Berejiklian said she'd told NSW Rural Fire Service commissioner Shane Fitzsimmons to "just do what you need to do and we'll pay the bill later".

Some 1870 NSW homes have been destroyed this fire season while 20 people, more than 6200 livestock and millions of animals have died.

Australian Associated Press