Preliminary analysis of 2021 Census data by researchers from the University of Canberra's National Centre for Social and Economic Modelling has found the number of people living below the poverty line has grown by 100,000 since 2016.
NSW Council of Social Service (NCOSS) CEO Joanna Quilty said it was another sign that a person's postcode had begun to dictate their quality of life.
"We have known for many years that people in western Sydney are doing it tough, but this data shines a light on just how tough, and the fact it's getting worse," Ms Quilty said on Wednesday.
"The so-called 'latte line' is becoming an impenetrable wall between those sitting pretty and those whose day-to-day lives are a constant struggle."
Ms Quilty called on newly-elected Premier Chris Minns to take action, urging him to build new social housing and prioritise people who were doing it tough.
The premier said he was not aware of the findings on Wednesday, but called the report "very sobering".
"You have inflation running between seven and eight per cent ... families are on the breadline and energy prices are going through the roof as well as interest payments and rents," the premier told ABC News Breakfast.
"We know that we've got an urgent crisis for literally hundreds of thousands of people.
"We need to make sure that we're in position with an economic program that can lift up people that are doing it tough," he said.
"I'm not suggesting it's going to be easy, but we've got the team in place with the energy levels to make a difference. I'm confident of that."
The report commissioned by NCOSS, showed poverty in eastern Sydney suburbs including Woollahra, Bondi Beach and Clovelly was declining, while in western Sydney suburbs like Ashcroft, Smithfield and Penrith, poverty increased.
"It tells us that we have not shifted the dial on poverty rates over the past five years," Ms Quilty said.
"Increased cost of living pressures and relentless rate and rental hikes over the past 18 months have compounded these issues – so the reality is likely far worse today than the data shows."
Older people had the most dramatic rise in poverty levels, with close to 50,000 more living in poverty compared to 2016, with the rate of older people struggling more than doubling in southwest and western Sydney.
The greatest rates of poverty growth were in Horsley Park (220 per cent), Lurnea Cartwright (131 per cent) and Liverpool (106 per cent), while high rates of poverty are also being experienced in the state's mid-north coast, the far-north coast, New England, the Central West and the Riverina.
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