The alliance (SKA), which spokeswoman Mairi Petersen described as "an ad hoc group of people of various persuasions", was born almost three years ago in response to Killalea Coastal Investment's (KCI) initial plans for a 202-lodge eco-resort.

News that the State Government had terminated the agreement to develop a resort within the state park was cause for celebration yesterday.

"This is excellent news," Ms Petersen said. "With an election in the wind, the Government has listened."

Ms Petersen said SKA would continue to pressure governments. "This development would have been in the absolute best part of the park ... the future of SKA lies in hanging together as a watchdog."

She suggested the Government could allow SKA members to join the Killalea State Park Trust.

Kiama MP Matt Brown said the Government would not be legislating for any further protection of Killalea.

"It has been further protected by the Government saying it will no longer entertain a proposal of this type," Mr Brown said.

He said the trust had been told to now move in a different direction. This would be discussed when the trust meets tomorrow night.

Trust chair Ed Gilmore said all avenues had been previously looked at "and we will do so again".

"It is quite unfortunate the project has fallen over ... there is a lack of tourist facilities in the Illawarra, and they are sorely needed in the Shellharbour district in particular," he said.

South Coast Labour Council secretary Arthur Rorris said the announcement was another victory for the alliance of community and unions on the South Coast.

"This has succeeded in preserving a pristine and valuable parcel of public land for future generations ... this is what green bans are all about," he said.

"The big lesson from Killalea is that public land and public assets are not to be used as mechanisms for quick developer bucks."

Sonya McKay, who organised a petition of more than 15,000 signatures against the development, said it was a win for common sense.