Acting Minister for Veterans, Geoff Lee, said the SS Wollongbar II was confirmed by archaeologists from Heritage NSW after it was reported by the local community.

"In 1943 a Japanese submarine, the I-180, destroyed the freight vessel with two torpedos killing 32 people on board," Mr Lee said.

"The ship sank in minutes with only five crew surviving the attack."

The SS Wollongbar II was one of many vessels lost to enemy assault along the eastern coastline during WWII.

"We have just commemorated our brave veterans on ANZAC Day but it's also important to remember the toll of war for everyday Australians," Mr Lee said.

"This secret has been hidden at the bottom of the deep sea for decades and the find will give some closure for descendants and relatives of the 32 people who lost their lives."

Local MP Melinda Pavey said a significant part of the Mid North Coast's wartime history had been solved with the shipwreck's discovery.

"The Crescent Head and Port Macquarie fishing industry cooperated brilliantly to help solve this mystery and I want to congratulate Heritage NSW for its important leadership," Mrs Pavey said.

When the vessel sank, it was carrying boxes of butter and bacon which eventually washed up on the shore resulting in a boom in cake making, which was normally restricted by wartime food rationing.

Director of Heritage Operations at Heritage NSW, Tim Smith OAM, said the discovery would reveal some amazing stories.

"We want relatives of those who sailed on the SS Wollongbar II to get in contact, so we can share findings of the survey conducted by our archaeologists," Mr Smith said.

The Wollongbar II was a single screw steamship owned by the North Coast Steam Navigation Company Ltd. At 2239 tons and 87 metres in length, the vessel had been built at Lithgow's Ltd shipyard at Port Glasgow, Scotland in 1922.

Wollongbar II was built to replace an earlier steamer of the same name wrecked at Belongil Beach, Byron Bay, in 1921.

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On April 29, 1943, the merchant ship Wollongbar II was torpedoed and sunk by the Japanese submarine I-180 off Crescent Head when she was on a voyage from Byron Bay to Newcastle.

Out of a crew of 37 only five survived. Onboard was a cargo of 18,000 cases of butter, sugar and bacon.

Just the day before, the vessel was searching for survivors of the freighter Limerick torpedoed and sunk off Ballina on April 26.

Captain Toshio Kusaka boldly surfaced I-180 only 450 metres from Wollongbar at 10:15am on April 29. Captain Charles Benson (59) and the Chief Officer Will Mason saw the conning tower submerging into a bubbling sea and a torpedo, already fired, bouncing erratically at them at speed. There was no time even to sound the emergency alarm.

Captain Benson bawled "look out for yourselves, boys", then went down the port ladder. The lookout man also left the bridge as Able Seaman Roy Brown remained at the wheel. Mason later recounted how the "torpedo struck us just forward of the bridge with a terrific thud" near Number 2 hold.

Within moments another torpedo slammed into the port side which "suddenly exploded with a thunderous crash". Survivors told how the ship broke in two, with the bow and stern rising sharply into the air.

Wollongbar II sank within two minutes. Five survivors began to row towards the coast and were collected by the Radley family's local fishing trawler, XLCR (Excelsior).

The XLCR still operates today out of Port Macquarie and is used as a training vessel for the Newman Senior Technical College.

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