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In this image from Google Earth, I have depicted the shape of the visible "cave" - going by memory:

According to the aerial photos that I have, the concrete boat ramp was built some time  between Jan 1979 and Oct 1980 and by 1988 the area was still void of sand.

And you can see from the previous 1988 aerial photo that the sea was obviously still getting right up to the sea wall in that area - at least in stormy conditions, as there is driftwood washed up close to where the sea wall is now.

On page 239 in “TunnelVision”, Martin quotes from a 'Restricted ' Military Report:

Along from Torpedo Bay wharf is an earth cave. There is no evidence of tunnels in the rear of the cave unless there has been a roof collapse. A vertical shaft 6' in diameter rises from the cave ceiling. It has previously contained a ladder. There is no sign of where the shaft leads to. Witnesses can remember traveling from the top of North Head to the waterline. This may have been the route they had taken. The shaft should be investigated.

Martin claims that this Report clearly indicated that this cavern existed as late as 1988 when the Report was made.

NH Page 14