COSTCO is set to open its second Australian store despite opposition from shopping centre owners.

The New South Wales State Government has approved a new $60 million Costco development in Sydney's west.

The decision was made despite objections from a group of the nation's most powerful shopping centre owners who claimed the development would be "anti-competitive" for other retailers.

The NSW Planning Minister, Tony Kelly, has given "concept plan approval" for the second Costco store.

The concept plan approval is subject to 157 conditions, including a requirement that Costco must build a new intersection on a nearby road to cope with the extra traffic around the store.

The final approval must be given by the Planning Assessment Commission of NSW the Department of Planning.

"This is great news for Sydney, this is great news for consumers," Mr Kelly said.

"Today's announcement will eventually lead to more variety and cheaper prices for consumers and more jobs for NSW."

The store will provide 230 on-going jobs and the construction will provide 130 jobs, he said.

Auburn Mayor Hicham Zraika said the development would provide a significant boost to the local economy.

"It will provide jobs for local people and attract more shoppers to the Auburn area," he said.

"The site is situated away from residential areas, hospitals and schools and is on a main road with large volumes of passing traffic, which makes it the right development for that location."

The local managing director of the US discount warehouse chain, Patrick Noone, said in an earlier interview that the Auburn Costco would be up and running about a year after approval was granted.

The new store will be located on the busy Parramatta Road, in Auburn.

Costco opened its first Australian store in Melbourne's Docklands last August and within four months more than 52,000 people had paid between $55 and $60 for the privilege of shopping there.

Savings for customers

According the planning documents, the Auburn store will have about 14,000 square metres of shopping area and about 800 car parks.

The selling space is about four to five times the size of an average Coles or Woolworths supermarket but the chain has a much smaller range of high-turnover groceries and merchandise.

Analysis by Costco says the 28 existing rival shopping centres in the Sydney catchment would lose a collective $61.7 million worth of sales to Costco.

A typical Costco will stock about 4,000 different items, compared to an average of about 27,000 different items in a large Coles, according to Greg Dring of Macquarie Research.

Costco expects first year total sales for the Auburn store of $97.5 million with an average of $155 per visit.

They estimate they will have about 60,000 members by 2021.

Costco's economic modelling, which is part of its development application, shows that their prices would be between 10 and 25 per cent lower than competitors.

"Overall, the analysis indicates that prices at Costco are in the order of 25 per cent lower overall than the price of the same products purchased from competing retailers, and this figure is approximately the same for both household and business card holders," the report, by Essential Economic, states.

"Of course for some products the savings are much lower, while higher savings are achievable for other products.

"For a very few product lines Costco was more costly than competing stores at the time that prices were collected...the price savings achieved at Costco are assessed as being in the range 10 to 25 per cent lower than competing retailers."

edmund.tadros@news.com.au