The country’s most populated city is becoming crippled, according to Infrastructure Australia.
Limited capacity at Sydney Airport is also proving a significant handbrake on growth in the city and entire country, says the federal government agency.
Train, bus and light rail links to better connect Sydney's outer bounds are front and centre of the federal government's agency's list of high-priority infrastructure projects.
Releasing the priority list alongside its first 15-year infrastructure plan, the agency said action was needed to tackle Sydney's under-pressure train network.
Sydney Metro, a proposed high-frequency rail link connecting Sydney's north shore and outer west through the CBD, drew praise.
"The growth in demand for services combined with worsening capacity constraints, means that without action the network will be unable to meet the city's ongoing transport needs," Infrastructure Australia said.
Sydney's three key bus corridors are also in need of significant improvements to boost transport efficiency.
"Inadequate investment in bus systems along the three corridors will result in greater reliance and use of private passenger vehicles," the report read.
Bolstering the city's roads network didn't escape scrutiny, with expanding WestConnex and upgrading the M4 roadway both canvassed in the report.
"The Australian Infrastructure Audit (2015) noted a number of corridors in Sydney's inner-west are severely congested now, and that this will get worse in the future.".
The report suggests pushing a business case to develop a second airport at Badgerys Creek in Sydney's west, positioned away from major population centres and operating without a curfew.
"The limited capacity of the existing Sydney airport is a significant constraint to aviation growth in the Sydney basin," Infrastructure Australia said.
"Without major additional capacity, economic growth in Sydney, and Australia more generally, will be constrained."