In Canberra they marked Australia Day with a gong for a champion of women but at Port Stephens it was a naked woman on a stubby holder for more than 20 new Australian citizens.

Port Stephens Council has issued an unreserved apology after its newest citizens, including two young girls, received a "Welcome to Australia" pack that included a beer stubby holder with an Australian flag and a lurid naked lady silhouette straight from the back of a 1970s panel van.

Appalled: Kate Washington. Credit:Marina Neil

Although the pack was put together by a volunteer committee, the council took full responsibility and deeply regretted the incident, general manager Wayne Wallis said.

"The gift bag containing the stubby holder was in no way part of the official citizenship pack, nor was any gift bag distributed by a member of council staff," Mr Wallis said in a statement after the council was made aware of the welcome pack item on Thursday.