Baby oysters will be hand sewn into a reef divers have established below the surface, as part of a three-pronged approach to protect Wagonga Inlet.

The ostrea angasi - deemed functionally extinct - will join a reef of Sydney rock oysters already making a home in the shallower waters of the man made reef.

The breeding ground has been created using quarried rock and oyster shells, in an effort to improve marine biodiversity, fish production and water quality.

A "living shoreline" will be established in the next stage of the project, which will rely on plants and other natural elements to prevent erosion, rather than traditional methods such as rock walls.

A boardwalk above the restored reefs is set to be established in the final phase in 2023.

Wagonga Inlet is one of 13 sites identified for reef restoration through an initiative that aims to bring oyster reefs back from the brink of extinction, while supporting the economic recovery of communities affected by bushfires and COVID-19.

The Wagonga reef will be the first subtidal oyster reef for NSW, a combined project between the Eurobodalla Shire Council, The Nature Conservancy, the federal government and NSW Department of Primary Industries Fisheries.

Jillian Keating, NSW Fisheries manager, said it's been estimated that 99 per cent of Australia's oyster reefs have disappeared.

"We did this superb job of basically obliterating them over a 30 year period in the late 1800s," she said.

Ms Keating said dredge fishing, which involves clearing the sea floor, disease and catchment clearing practices all contributed to their demise.

"And oysters are obviously a really amazing source of cement," she said. "You could pretty much say Sydney's foundations lie in oyster reefs."

Salt marsh on the foreshore will be rehabilitated to protect the oyster reef, acting as a natural buffer against wave energy, Ms Keating said.

"Living shorelines don't work in all sites, but where there's kind of relatively low impact and low energy it's a really great solution.

"It allows for migration of habitats, so can actually adapt as the sea rises.

"These are the kinds of solutions that we've got to start looking for."

The Narooma project is expected to act as a pilot for reef restoration initiatives around the state, thanks to a combined community effort.

Oyster fisherman stockpiled shells which volunteer groups helped scrub and bag oysters destined for the hatchery. Volunteers have also been trained up to monitor the reef. Their work will compliment that of the Joonga Dive Team, an Indigenous group monitoring the subtidal oyster reef.

NSW Fisheries coordinated Australia's first intertidal Sydney rock reef, recently completed in Port Stephens.

Ms Keating said there were 50 million oysters already on the reef within four months.

Their monitoring also found there were 50 times more juvenile fish on the restored reefs than on adjacent bare sand within that time period, she said.

Ms Keating said the canary in the coalmine analogy has been likened to oysters in the estuaries.

She said one way to measure the health of the waterways was by looking at the oyster industry.

"A lot of people aren't aware of what's in their backyard," she said. "And the history that came before the oyster reef project.

When it came to protecting the waterways, Ms Keating said the South Coast was definitely headed in the right direction.

"We need to keep learning, monitoring and creating awareness," she said.

Damon Fernihough is relatively new to oyster farming, having started the family business six years ago in his late 20s.

He said for many farmers a return of the angasi would go someway to restoring the natural order of things in Narooma.

"This is how it used to be, how it should be," he said.

"If we want to keep the the ecosystem healthy, which is what our oysters need to grow, then something like this is important, whether it's direct or indirect in the way that it affects us."

Mr Fernihough said leases for areas to farm are not expected to change.

He said maintaining the health of the waterways was something all those making a living from it would need to work on and adapt to over the coming years.

The South Coast largely escaped the flooding that destroyed Hawkesbury-based farmers' yields and disease outbreaks that wiped out crops in Port Stephens this year.

Mr Fernihough said while farmers in Narooma had been lucky, the trouble experienced by farmers further north left them feeling vulnerable.

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Despite the risk, returning to life without the oyster rig was now unimaginable, he said.

"It's the romance of it, you know? Working on the water, working with oysters.

"It's a hard thing to explain, a hard thing to define. It's a lifestyle.

"It's a feeling of connection to the environment and to the beauty of the place," he said.

"You can't be an oyster farmer and not feel in some way connected to that side of it as well.

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