The NSW Government says revenue from a new property-based charge for funding fire and emergency services will grow 2.8% a year to more than $1 billion in 2019/20.

Last week’s 2016/17 budget estimates the emergency services property levy – starting on July 1 next year – will generate taxation revenue of $941 million in 2017/18, $989 million in 2018/19 and $1.04 billion in 2019/20.

Treasurer Gladys Berejiklian told Parliament the new levy will “reduce the cost of the average insurance premium and improve underinsurance rates in NSW”.

About 36% of NSW households have no contents cover, which critics say is exacerbated by the current levy on insurance.

The current levy is estimated to make residential insurance policies 20% more costly and commercial policies 40% more expensive.

“The vast majority of insured residential property owners are expected to be better off under the reform… [which] will provide a fairer system of funding fire and emergency services,” the budget paper says.

Residential property owners with insurance are expected to be $40 better off a year.

The new property-based levy, which will be paid alongside council rates, is based on the value of unimproved land.

The NSW Government has also earmarked $58.5 million over the next four years to implement stage one of the Hawkesbury-Nepean Valley flood mitigation program.

About $30.3 million will be spent on detailed concept designs, environmental assessments and preparation of the full business case.

The rest will be set aside to establish a flood risk directorate, to implement the strategy.