The Premier, Gladys Berejiklian, announced on Tuesday that while her government would proceed with mergers in Sydney, it would walk away from proposed mergers in regional areas including Newcastle and Port Stephens, and Maitland and Dungog.

Ms Berejiklian said Hunter councils would “retain their own status” after more than a year in limbo, and would go to an election on September 9.

While the government will push ahead with five outstanding mergers in Sydney, mergers in regional areas will be abandoned.

Ms Berejiklian told reporters that regional councils should have been treated differently to those in Sydney, and that she had “listened” to community concerns about the mergers.

In a decision that Ms Berejiklian said was not in her “personal best interest” because of an upcoming byelection in the seat of North Shore, she said 

The issue was discussed at a joint party room meeting after a special Cabinet meeting this morning.

A decision on the merger has been expected since Ms Berejiklian took over as Premier last month, as the new government looks to shed some of the unpopular policies that dragged down Mike Baird’s popularity in 2016.

Following Mr Baird’s resignation new Nationals leader John Barilaro sought to kill off mergers in regional areas vowing ““to bring an end to local government mergers in the bush”.

That vow included the proposal to merge Maitland and Dungog councils, but not Newcastle and Port Stephens, which the Nationals said was “a question for the Liberal Party”.

The merger proposal between Port Stephens and Newcastle has proven extremely unpopular in among ratepayers north of Kooragang, with a number of protests and demonstrations opposing the idea.

Ms Berejiklian denied her government was being held hostage by the Nationals, saying she appreciated the “frank” conversations she has had with Mr Barilaro since taking over the top job.

The decision not to merge any of the Hunter councils will leave questions marks over the status of Dungog, which has said it needs state government assistance to tackle its infrastructure backlog.

However Mr Barilaro said on Tuesday that all councils would have to stick to the “plans for the future” they put forward during the government’s initial “Fit for the Future” process.

“Every council had a flight path,” he said.

“They will go back to their plan as they saw at the time about remaining viable.”

Port Stephens Labor MP and shadow minister for the Hunter Kate Washington said she was “relieved” that the government had backed down on the issue.

“It has been a ridiculous amount of time that this threat has been held over all four communities,” she said.

“I’m relieved that they’ve finally seen sense but it’s been a dog’s breakfast from the beginning to the very end.

“None of it was founded on any sustainable economic position, and we’re all meant to pretend it never happened.

Ms Washington said it was “outrageous” that residents would have to wait until September until the next election.

Parliamentary Secretary for the Hunter Catherine Cusack said the decision was “great news for the Hunter”.

“Every council effectively put a submission to the government that they wanted to stand alone, including Dungog, and this decision respects their wishes and gives certainty so that everyone can get on with providing good local government,” she said.

She said the decision would give Dungog Council the “space” and “certainty” to consider what it wanted to do in the future.

Ms Cusack also defended the Fit for the Future process, saying councils had told her that they’d benefited from the process.

“For all of them it has re-calibrated their finances, the Fit for the Future policies have benefited all the Hunter councils without any question,” she said.

Port Stephens general manager Wayne Wallis welcomed the decision, noting the “massive groundswell of community opposition” to the merger.

“Council's focus is now, as it always has been, on moving forward on our comprehensive program of work,” he said.

“The efforts of staff to both keep delivering Council services to our normal high standards, whilst putting in a considerable amount of work on transition planning deserves commendation.”

More to come.