Councils in Western Sydney have backed the Federal Government's proposal to provide funding to lift the wall of Sydney's Warragamba Dam.
But some environmental engineers and conservationists have questioned the need to do so.
The Federal Government says it is prepared to contribute up to $50 million in funding over two years if the State Government moves to raise the height of the dam wall.
Figures suggest that if Sydney experienced a flood similar to the 2011 flood in Brisbane around 14,000 homes in the Hawkesbury-Nepean area would flood.
The modelling suggests another 6,500 homes would be destroyed.
A previous proposal to lift the dam wall by 23 metres was rejected by the State Labor Government in 1995 when Bob Carr was Premier.
Infrastructure New South Wales estimates the overall cost to raise Warragamba Dam is around half a billion dollars.
The NSW Government is yet to respond to the proposal which comes ahead of Prime Minister Julia Gillard's planned campaign blitz in Western Sydney next week.
Environmental engineer Dr Stuart Khan from the University of New South Wales argues there would be no need to raise the wall if the State Government better managed flows from the dam.
He says the management of Warragamba is primarily focused on water supply and not mitigation.
Dr Khan believes the dam does not need to be full to the brim to keep Sydney's water supply at an adequate level.
"Doesn't matter how large your reservoir is," he said.
"What matters is how much space you reserve in that revision for flood mitigation.
"Rather than rising the wall of Warragamba Dam, really what we should be doing is managing the water in the reservoir and we should be managing such that we don't fill it to the brim."
Dr Kahn has warned that if the government raised the dam wall and continued to keep the dam full, floods such as the one in 1998 would be disastrous.
"It was a thousand gigalitres flowing into Warragamba in a matter of a couple of weeks, fortunately that was fine because it just so happened that the dam was half empty," he said.
"If we had that same inflow today while that reservoir is completely full to the brim and currently overflowing, we would have a major, major devastating flood."
Tiffany Tree from the Western Sydney Regional Organisation of Councils agrees that flows need to be better managed but she also supports lifting the wall.
"I think there's definitely the mixture of the two, the number one top priority for infrastructure for NSW as reported by Infrastructure NSW was the raising of the dam wall," she said.
"However we've always had the position that while that is top on our wish list we would also like to see the dam wall utilised in a different way.
"So the legislation needs to be changed by the NSW Government to change the operation or the procedures of the dam wall."
Environmentalists are also worried about the impact on the Greater Blue Mountains World Heritage Area.
Keith Muir from The Colong Foundation for Wilderness says a higher dam wall could cause serious damage in the event of a large flood.
"About 7,500 hectares of sensitive parklands and 300 Aboriginal sites will be inundated by floodwater, causing much devastation, if Ms Gillard's funding proposal goes ahead," he said.
"Using the existing dam more effectively would be much cheaper, environmentally sound.
"Operation of the existing dam should be optimised with new flood gates to take advantage of the five metres added to the dam wall in 1989."
The New South Wales Government announced last month it was reviewing flood mitigation in the Hawkesbury-Nepean Valley.
© ABC 2013
18:19 EDT Some cattle stations on the Barkly Tablelands of the Northern Territory are reporting the first decent rainfall in two years.