For residents of the inner west, the decision means a peninsula that already carries heavy traffic will face even more congestion each time a cruise ship comes to port.

For a city trying to revamp its tourist appeal, the journey from the terminal across Anzac Bridge to the city's main attractions would take the gloss off the visit.

"White Bay is a sub-optimal location," said Ann Sherry, the head of Carnival Australia, which handles the largest number of cruise ships visiting Sydney.

The Government announced the little-noticed decision just before Christmas.

The Minister for Ports, Joe Tripodi, and the Planning Minister, Kristina Keneally, are behind the move to White Bay, which will create political difficulties for the local member, Verity Firth, a rising star in the Government, who holds the education portfolio. She holds the seat of Balmain by a margin of only 3.75 per cent and any backlash could let the seat fall to the Greens.

"As far as we are concerned the Government has not thought through the idea at all," said the Leichhardt Mayor, Jamie Parker.

"It is a high-density residential area and traffic in and out of White Bay is already a nightmare."

Each cruise ship arrival would involve 600-1000 traffic movements, and at least 30 truck movements, which would be repeated for each departure.

Port facilities for visiting cruise ships were included in the initial Barangaroo redevelopment at East Darling Harbour but they have since been dropped.

The Government says cruise ships need an onshore "exclusion zone" for immigration and customs, which will be available only at White Bay, even though internationally such facilities are incorporated in port-side shopping malls.

The Government has said the White Bay terminal will be temporary, but the existing Darling Harbour facility was also supposed to be temporary and it has been in use for a decade.

When it is operational, the White Bay terminal will handle more than 75 vessels a year.

Cruise ship demand is well ahead of port capacity but the Government has yet to clarify its longer-term thinking for the industry, particularly whether White Bay will be a permanent solution.

"For a State Government so keen on big announcements, they sure kept this one under wraps," the Opposition ports spokesman, Andrew Stoner, said.

"Residents and the local council were not even told about the plans. If Joe Tripodi and Verity Firth want a cruise ship terminal built in Balmain they should have at least have had the guts to consult with the local community."