In a sit-down with the Herald, council CEO Jeremy Bath said after consecutive deficits through COVID-19, the upcoming 2022-23 budget was an acceleration out of the pandemic into a new phase of economic growth for the city, with a "modest surplus" of $1.2 million forecast next year.

The $424 million budget is the largest in the city's history and includes a record $132 million capital works spend - almost 30 per cent more than the previous budget and up 87 per cent from 10 years ago.

"That's a number that, when I started here five years ago, I never thought we'd be able to achieve," Mr Bath said. "When I started here, our works program was in the vicinity of about 70, pushing $80 million a year."

The budget is headlined by four major projects with a combined $50 million allocated. Top of the list is the Newcastle Art Gallery expansion. More than $17 million of the $40 million price tag has been set aside to add 1600 square metres to the gallery, which Mr Bath said would boost the city's tourism appeal. The project received $10 million state and federal funding and another $10 million bequeathed by the late Val Ryan.

"I think for too long, Newcastle has relied, from a destination marketing perspective, on the quality of our beaches," Mr Bath said. "Our beaches are the best. There's no doubt about that ... but are they so spectacular, that they're going to actually convince someone from Melbourne or Sydney or Brisbane to fly to Newcastle and spend a couple of hundred dollars a day? Probably not. And that's only because those cities all have the almost equally spectacular beaches.

"So we've really worked very hard on identifying ways of differentiating ourselves from our competitors and our competitors are all the other beautiful cities in Australia, especially on the east coast."

The other three "city-shaping" projects in the budget relate to a transition of waste management.

More than $18 million has been allocated to remediation of the former Astra Street landfill site in Shortland which closed in 1995, $9.4 million to start building the Summerhill food and garden organics facility and $5 million for planning of a plastic, glass and paper recovery facility.

Mr Bath said a record amount was also being set aside for cycleways - $4.4 million.

"That's probably about double what this council has ever actually spent on cycleways in one year," he said.

The growing works programs have been supported by a five-year special rate variation introduced in 2015, which boosted council's average rate to fifth highest in the state in 2019-20.

Council has applied for a one-off rate increase of 2.5 per cent this year, after the annual peg was set at 1.2 per cent for the city, including 0.5 per cent for population growth. Lake Macquarie has also indicated its desire for the one-off increase after its cap was set at 0.7 per cent.

Mr Bath said IPART's "atrocious" decision to set the lowest rate peg in two decades was forecast to cost the city $15 million over 10 years compared to 2.5 per cent, with inflation at 3.5 per cent, and construction costs up 7 per cent last year and still rising.

But inflation is also being felt by residents. The proposed 2.5 per cent increase comes at a time Australians are facing rising cost of living pressures.

Mr Bath said the rise worked out to be an extra $40.35 on average a year and he was comfortable asking ratepayers for that.

"I think you only need to look at the election results to see that, people didn't vote for change," he said. "Without wanting to go down the slippery slope of politics and all that, but people voted for more of the same.

"That tells me that people are really comfortable. I know that not just from the election result, I know that from being out there and speaking with people on a daily basis.

"People don't have patience to wait for the transformation in Newcastle to be done over a decade or even longer. That's why I'm amazed that 30 years ago, people considered the standard of the Newcastle Ocean Baths to be acceptable. I'm amazed that 20 years ago... when we already had an art gallery that wasn't large enough to display its collection, that people thought that was okay.

"The council 10 years ago was under-collecting [rates]. The reality was in terms of public expectation, with the amount of money that people were actually contributing to council finances, there was a disconnect. People's expectations were up here, but they were actually paying money down there.

"The consequence of that was that council was year after year running budget deficits and they weren't paper deficits, they were real deficits.

"So the council went through a public consultation process... The community very clearly came out and said that they support a reasonable increase in rates on the basis that the money was being invested into priority projects.

"So we gave a commitment that we would deliver on these projects."

As well as a record works program, the rate rise is also expected to help deliver a surplus, both of which Mr Bath said he was confident of achieving after a tumultuous few years. After the pandemic hit, the council increased its spending to stimulate the economy, which put it's bottom line into the red, while Mr Bath said council's income took a $40 million hit.

The latest monthly report listed council's operating position at the end of March as a deficit of $5.1 million and the revised 2021-22 budget as a $13.5 million deficit.

Council's chief financial officer David Clarke said revenue returning to "some sort of normality" combined with "having a bit of discipline around our approach to costs" would help to get back in the green.

And now lockdowns are "in the rear view mirror", Mr Bath said the focus would be on financial sustainability.

"COVID is in the rear view mirror, but the shadow still remains - not just mentally but, in our forecast revenues for parking meters, for ticket sales at the Civic Theatre, for patronage at the Stockton Holiday Park, for example. They're not back to pre-pandemic levels.

"We're not back to where we were, but we're confident that we're going forward.

"The challenge for us now is to try and maintain that economic stimulus. If we're going to spend $132 million on infrastructure projects, what can we afford to do the year after and the year after.

"I think the public would make it very clear if there was some sort of sizeable pullback in terms of our commitment to new playgrounds... or revitalising our prominent parks. The challenge is to make sure we don't slow down."

A motion to exhibit the budget will be put to Tuesday's council meeting.

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