Kerri Pottharst's gold at the Sydney 2000 Olympics is one of Australia's most memorable sporting moments.

But nine months out from the Tokyo Olympics, Australia's medal prospects have hit a major snag after the NSW Government cut funding for the nation's premier volleyball competition.

Key points: Destination NSW cut Volleyfest's $450,000 funding for the event, held at Manly Beach

Destination NSW cut Volleyfest's $450,000 funding for the event, held at Manly Beach Athletes consider the annual event to be an important Olympic qualifier

Athletes consider the annual event to be an important Olympic qualifier The Queensland Government has expressed interest in hosting but organisers say it may be too late

It is a move Pottharst describes as "devastating" for the sport.

"Having us win the gold made people realise beach volleyball is such a perfect sport, here at Manly beach we are like the Mecca of beach volleyball," the Olympic gold and bronze-medal winner said.

Destination NSW, an arm of the State Government, has cut its $450,000 funding for Manly's annual Volleyfest event, leaving Volleyball Australia less than a week to find a new venue or alternative funding.

"For our government to really be that short-sighted and pull the funding at the last moment, it's really been devastating for our athletes, devastating for our sport," Pottharst said.

The 10-day tournament includes the National Championships and a Federation of International Volleyball (FIVB) World Tour 3-star event, which go towards qualifying for next year's Games.

Kerri Pottharst (left) following her gold medal Olympic win with playing partner Natalie Cook. ( Instagram: @kerripottharst )

Commonwealth Games gold medallist Chris McHugh said it was supposed to be his first tournament after coming back from injury.

"To have it at home would have been a really great preparation, it's a huge disappointment and such a shame," he said.

Olympic hopefuls will now have to find overseas competitions in which to qualify, but McHugh said having a home competition was "incredibly important".

"We spend five months travelling overseas to compete and going into the last six months of qualification, every single point that you can get is super critical," he said.

Cancellation on the cards

Volleyball Australia chief executive Andrew Dee said the Queensland Government had expressed interest in hosting, but changing venues with such short notice may be logistically impossible, and the event may have to be cancelled.

Destination NSW confirmed the funding cut in a statement, but gave no reason for the decision.

"Destination NSW has contracted many other events to drive tourism in NSW over the 2019-20 financial year, and unfortunately the investment requested for Volleyfest cannot be accommodated in this year's events budget," the statement from Destination NSW said.

Volleyball Australia is urging the NSW Government to reconsider ahead of the Olympic year.

"It's important governments have a diverse view of what sports are loved and played by Australians — it's not about just one or two codes, it's about being good at many sports," Mr Dee said.

Kerri Pottharst said Australia still had a real shot on the podium in Tokyo, with eight athletes looking to grace the podium and one definite gold-medal chance.