The lord mayor, Clover Moore, has accused the Premier of subverting proper planning by supporting a second Sydney casino and hotel in an area of Barangaroo where such developments are prohibited.

Cr Moore said Barry O'Farrell risked undoing years of planning work by backing James Packer's plan "to plonk a clumsy Dubai-style hotel with a new mega-casino right in the middle of Barangaroo Central". Her attack came after Mr O'Farrell described as exciting Mr Packer's plans for a casino and high-rise hotel, branding the $750 million project the "sort of tourism-related investment we want".

Cr Moore said Mr O'Farrell had rightly criticised the former Labor government for making "ad hoc planning decisions" but now appeared to be doing the same thing by praising plans only provided to him on Friday.

The Premier "has given support to a proposal that hasn't been properly scrutinised by the community, let alone put through proper channels," she said.

Mr Packer, the executive chairman of Crown Ltd, unveiled his audacious plan for a 350-room six-star hotel and casino over the weekend.

More controversial than its size is its location in the middle of the 22-hectare site at Barangaroo Central reserved for "civic, educational and recreational" uses with building heights capped at 30 metres.

Mr Packer agreed on radio that a hotel in Barangaroo Central, well north of Lend Lease's office tower project, would ensure guests, especially Chinese, had harbour views unobstructed by high-rise city buildings.

"These guys want to go to the the best place but when they come they want to stay in a place that's luxurious," he said.

"We'd like to build something the next level up."

Citing research that 80 per cent of Chinese tourists want to visit a casino, Mr Packer said Sydney needed top-class hotels to compete with Singapore and Macau. "We would not want any slot machines … it would be a table-only facility … not be a huge amount of tables … but you do need that revenue source."

Mr Packer has already bought 10 per cent of Echo Entertainment, the company which owns the exclusive licence for Sydney's Star casino, but has applied to increase his holding. If he can take control of Echo, he will need a change in the licence to allow him to open what would be a branch casino at Barangaroo.

Developers and tourism representatives welcomed his plans although Chris Johnson, the head of the developer lobby group Urban Taskforce and judge of the original architectural competition for the site, had some reservations. While the hotel complex was welcome it was so far north "we have to be careful it does not look like it's totally on its own".

And he said an open planning process was essential. "There has to be some process calling for bids rather than one just arriving from outer space."