After early successes getting people to pay fines and taxes on time the behavioural insights unit in the Department of Premier and Cabinet is now applying its strategies to more complex policy challenges.

A new report on the unit's work shows how better wording of SMS reminders can deliver big cost savings and service improvements.

The unit ran a trial at St Vincent's hospital aiming to reduce missed outpatient clinic appointments which cost up to $125 for each no-show. Small changes to the text message reminders slashed the non-attendance rate by about 20 per cent. Messages that told patients how keeping appointments "avoided loss to the hospital" and "avoided loss to the patients at the hospital" were the most effective.

The improved attendance delivered a $66,000 per year saving to the hospital and the findings can help make savings at other government health facilities.

The unit trialled several reminder text messages to encourage social housing tenants to pay off their rental debt, with the most effective message leading to 9.4 per cent more tenants paying off arrears compared with those not sent a text message.

Simple nudges have also been effective in public health promotion. The unit tested four different letters sent to women in NSW urging them to arrange an appointment for a pap test in order to prevent cervical cancer. The most effective letters, which used language and layout to emphasise the gains from being tested, delivered a 30 per cent increase in the screening rate. This is projected to lead to an extra 7500 women attending a pap test appointment each year in NSW.

The NSW government was among the first in the world to emulate the British government in creating a behavioural insights unit. It has been operating for four years. The report says it "works across the NSW Government helping to improve the effectiveness of public services and policy by applying what we know about the way people think and act". Similar teams have been established by the federal and Victorian governments.

Alex King, the director of NSW's behavioural insights unit, said it is moving on to more challenging social and economic policy issues.

"We are continuing to apply behavioural insights across a broad range of areas and to increasingly complex problems to get better outcomes for the people of NSW," he said.

The unit will now investigate ways that commuters could be nudged to travel outside of the morning and afternoon peak periods to alleviate congestion in the CBD.

It aims to use behavioural psychology to help improve "patient journeys" from hospital to home and to boost apprenticeship completion rates in NSW.

The unit will address the problem of domestic violence by testing how nudges could be used to reduce the number of breaches to apprehended domestic violence orders.

The report said it will also trial ways to combat "unconscious bias" in the attraction, selection, promotion and retention of employees in a bid to increase diversity in the NSW public sector.

NSW's behavioural insights unit draws on the work of behavioural psychologists and economists who have shown that human biases often cause people to make choices that seem contrary to their interests.

The aim is to apply those biases – such as the desire to conform with social norms – to help people make superior choices that save governments, and citizens, time and money.

Advocates say well planned "nudges" can make people's lives better while maintaining freedom of choice.

Critics of government nudge units claim they are paternalistic, manipulative and lack transparency.