Former NSW Liberal leader Peter Collins has stepped up pressure on the state and federal governments to reconsider Sydney's Garden Island as a site for a third cruise terminal, disputing suggestions that berthing cruise liners at the naval facility will be a threat to national security.

Mr Collins joined more than 1000 locals, Indigenous leaders and politicians from Labor, the Greens, and Shooters, Fishers and Farmers at a rally on Sunday to oppose controversial plans to instead build a $600 million cruise terminal at Yarra Bay, a cove on the north-eastern side of Botany Bay.

"This isn't a 'NIMBY' thing. This isn't a Liberal-Labor thing. This is about good public policy," said Mr Collins, who led a reference group two years ago that recommended the Navy and cruise ships share Garden Island in Sydney Harbour.

More than a thousand people attended a rally to oppose plans for a cruise terminal at Yarra Bay. Credit:James Alcock

Mr Collins, a Navy Reserve captain, challenged the Turnbull government's decision two years ago to rule out Garden Island as a dual facility on national security grounds.