And the NSW government's desire to explore Canberra Airport as Sydney's second air hub leaves the state government with ''a challenge'' in making a decision on the controversial Tralee housing development.

NSW Premier Barry O'Farrell has dismissed a renewed call for a second Sydney airport, saying Canberra Airport should instead be linked to Sydney by fast train.

But plans to build up to 7000 homes under Canberra Airport flight paths across the NSW border at Tralee have fuelled an 11-year feud between the airport's operator and the scheme's proponent the Village Building Company.

But Chief Minister Katy Gallagher said yesterday local Canberra issues, including aircraft noise and pollution, would take precedent when her government made decisions about an airport expansion. ''Obviously Barry O'Farrell's got an issue around what he does around airport and demand for airport services in Sydney,'' Ms Gallagher said. ''I would certainly support Canberra Airport playing a larger role than they play at the moment but I'm not sure if we need to be tagged as Sydney's second airport city.

''We have to be mindful of the impacts on our city as well and if we were going to be Sydney's second airport there would be impacts on the local community which we would have to understand before having a view on that.''

Mr O'Farrell's plan for a second Sydney airport in Canberra is dependent on a high-speed rail link between the two cities, however, Ms Gallagher said there had been more than 20 years of talk about very fast rail. ''People have a right to be cynical about it and it's great to dream but it's harder to bring something to reality,'' Ms Gallagher said.

''I think the difference is the Commonwealth is doing a much greater detailed design of the possibilities of this rail network along the eastern seaboard.''

She also said Mr O'Farrell and his planning minister Brad Hazzard had a challenge over Tralee.

''The NSW government is considering that development, we're opposed to it, we don't think it's good planning, putting houses under aircraft noise.

''That's a challenge for Mr O'Farrell and his planning minister and we've made our views very plain on that.''

Canberra Airport chief executive Steven Byron reiterated his position yesterday that Canberra was a suitable site for a Sydney airport expansion.

''We've got 80 to 90 years capacity so there's no problem there for a runway configuration option,'' Mr Byron said.

''What we do think is that we do have an important overflow role and the more likely it is that a second Sydney airport site won't be built, then the more important our overflow role is.''

Village Building chief executive Bob Winnel said the proposed development at Tralee more than conformed to national environmental noise standards for the airport's ultimate capacity based 24-hour operation.