The NSW government is proposing legislation that will permit police to dismantle the tent city.
Gladys Berejiklian is speaking to her Liberal and National Party colleagues about "a plan" to clear the camp in Martin Place outside the Reserve Bank of Australia.
"Last night I heard the mayor say that the tent city would be gone overnight and that hasn't happened, and I said we would give council until last night, it has not happened, so we'll be taking action today," she told reporters on Tuesday in Sydney.
Sydney Lord Mayor Clover Moore and Lanz Priestley, dubbed the Mayor of Martin Place, agreed that council would help pack up the camp and transfer about 70 homeless people to a "communal safe space" until temporary or permanent accommodation was found.
“The Government has already committed to creating a safe space – all they need to do to resolve this situation peacefully is work with us on an interim solution,” Lord Mayor Clover Moore said.
“Instead the Premier is moving to change the law, potentially setting up the risk of violent conflicts between police and vulnerable homeless people as we saw in Melbourne.
“The City does not have the power to move people on. The police do have these powers.”
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But with no designated "safe place" the tent city remained pegged down on Tuesday morning.
Three council trucks arrived at the site in the early hours of Tuesday to move some of the inhabitants' belongings to storage, but Mr Priestley said the group wouldn't move until the safe space was identified.
"I have no address for it. I have no sense of where it is, or anything," he said at 5am.
Mr Priestley, 72, has since said he was very disappointed by the NSW premier's threats to take action against the Martin Place site.
"If they act on it today, it's a clear demonstration by the Berejiklian government, in the middle of Homelessness Week, what the attitudes are to homeless people."
The site, he says, is about safety for homeless people seeking shelter, many of whom he says don't qualify for housing and laid the blame at the government's feet if anyone ended up hurt when forced alone back onto the streets.
"Is it the intention that those people are out there free for anyone to give a kicking, to be robbed, to be raped," he told AAP on Tuesday.
Ms Moore told ABC Radio on Tuesday that she didn't want a repeat of the violent scenes that occurred in Melbourne in January when a homeless camp was moved on, but admitted a safe space hadn't been designated.
"It's still a work in progress," she told ABC radio at 7am.
The NSW Department of Family and Community Services and the council were expected to chip in $100,000 each to help set up the space, it was announced on Monday night.
On Monday, Ms Berejiklian warned the City of Sydney that the issue needed to be resolved.
"If they don't act ... we're going to have to, but I want to stress, they're powers that are very, very rarely used by the state government," Ms Berejiklian told reporters in western Sydney.
She warned the powers are "quite direct and quite heavy-handed".
