The High Court on Tuesday unanimously ruled the relevant section of the government's Electoral Funding Act 2018 was invalid because it unreasonably interfered with the implied freedom of communication protected by the constitution.

"The defendant (the government) has not justified the burden on the implied freedom of halving the cap ... as necessary to prevent the drowning out of voices other than those of third-party campaigners," Justices Susan Kiefel, Virginia Bell and Patrick Keane wrote in their joint judgment.

The laws capped campaign expenditure by third parties - including unions - at $500,000 which was less than half the previous limit of $1.05 million.

Unions NSW secretary Mark Morey says the union movement had always pooled resources to get its message out during election campaigns.

"This now allows us to continue to do our work effectively," he told reporters in Sydney.

"The High Court has said ... that a government cannot rig an election, a government cannot silence its critics in NSW by using the parliament and passing legislation."

Treasurer Dominic Perrottet says the decision means unions will now have "free rein" to fund wall-to-wall advertising during the upcoming NSW election campaign.

"The purpose of our legislation was to clean up politics," he said in a statement.

"The government believes elections should be free and fair, not bought with out-of-control spending by unions and other third parties."

The NSW Greens say Tuesday's court defeat is an embarrassing blow for the Berejiklian government.

"This law was struck down because the High Court saw it for what it was - a blatant attempt to put politicians' interests before those of the community," democracy spokesman Jamie Parker said in a statement.

"The Liberal Party's laws gave millions more to politicians and cut in half the amount that community organisations could spend, and they did it without any evidence to back it up."

The government will have to pay the costs of the High Court case.

Australian Associated Press