The council had earmarked the site as a new permanent home for the cabins after it was forced to remove them from the adjoining caravan park last month due to severe erosion.

The meeting, attended by lord mayor Nuatali Nelmes, senior council staff, Department of Planning representatives and traditional owners, followed numerous complaints about the lack of consultation and formal process regarding the relocation of the cabins.

The council has now agreed to stop work on the site and secure the relocated cabins in the short term.

A council spokesman said it was not known if the cabins would remain on the site in the long term.

The council has also agreed to develop of Plan of Management for the Rawson Park Reserve in order to protect its Aboriginal heritage.

Cr Nelmes welcomed the input from Worimi Land Council chief executive Andrew Smith and local elder Lennie Anderson.

"It's clear there is an amazing history going back a significant amount of time on this site that is important for not only local Indigenous people but for the whole community," she said.

"We want to make sure that although Stockton is a natural disaster zone and emergency works have taken place, that they are only done in recognition of this being an Aboriginal place and that any artefacts found are protected and our cultural heritage is preserved."

The council has managed the Rawson Park Reserve, which the caravan park occupies about 25 per cent of, since 1895.

The caravan park is operated by Australian Tourist Park Management, a subsidiary of NRMA.

The council estimates the park, which operates 19 two bedroom cabins, eight three bedroom cabins, 111 caravan sites and 35 camp sites, contributes between $8.4 million and $16.8 million to the Newcastle economy annually.

It also returned just over a $1 million to the council in 2019.

The profits are held in the Rawson Reserve Trust that is used to maintain and upgrade facilities on the beachfront. Among the projects that have benefited in recent times are Stockton Pool ($350,000), Mitchell Street seawall ($380,000), Lynn Oval ($33,000), Stockton Surf Club ($11,000) and Barrie Crescent Drainage ($35,000).

Chief executive Jeremy Bath estimated the temporary loss of income would cost the Rawson Reserve Trust $118,000 over the remainder of this financial year.

If the 12 cabins are ultimately unable to operate the annual loss would be more than $350,000.

"Given the looming cost to City of Newcastle of a permanent solution to coastal erosion that will be in the many millions of dollars, any loss of income is something we must avoid at all costs," he said.

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