Packer's $1b casino plan gets cabinet backing

James Packer's vision for a $1 billion casino and hotel complex at Barangaroo has passed its first hurdle by gaining cabinet backing to progress to the next stage of the state government's approval process.

The decision, announced this morning by the Premier, Barry O'Farrell, means the government will enter into detailed negotiations with Mr Packer's company, Crown Limited, about how to proceed.

The announcement comes after intense lobbying by Crown of government, opposition and cross bench MPs and two days after the proposal received conditional backing from the Labor opposition.

The Herald reported last week that the government was considering giving cabinet backing to the plan by considering it under its new "unsolicited proposals" policy.

Cabinet's endorsement means the project will enter stage two of a three stage process, whereby Crown and the government will enter into a participation agreement and prepare a detailed proposal.

The decision is also a strong indication the government is willing to consider introducing legislation to award a second Sydney casino licence, which Mr Packer says is needed to make the luxury hotel project financially viable.

Crown's rival, Echo Entertainment, owner of the Star casino, owns Sydney's monopoly casino licence until 2019, but Mr Packer is understood to be positioning himself to be awarded a second licence after that date.

Mr O'Farrell announced Crown lodged a proposal with the government on September 6.

The chairman of Echo, John O'Neill, has questioned why there would not be a competitive tender for the second casino licence and even the hotel.

In August, Mr Packer briefed Mr O'Farrell on a two-year exclusivity agreement that Crown has struck with Barangaroo's developer, Lend Lease, to build a luxury hotel and casino resort at Barangaroo South.

After the meeting, Mr O'Farrell said he had "encouraged Mr Packer to progress any proposal through formal channels".

At a budget estimates hearing two weeks ago Mr O'Farrell announced that the proposal would be dealt with through the government's unsolicited proposals policy, but refused to comment further for reasons of commercial confidentiality.

Crown is in negotiations with the developer of Barangaroo, Lend Lease, and the state government's Barangaroo Delivery Authority over the size of the proposed hotel and casino complex.

Currently planning restrictions cap the hotel at 170 metres, or about 40 storeys, but Mr Packer is pushing to have that increased to as many as 60 storeys, or about 250 metres.