The decision means parents will no longer be expected to pay fees to get their children to school in 2009.

Independent Member for Port Macquarie, Peter Besseling, said the government's change of heart is a great outcome for families everywhere.

"It's certainly been a contentious issue for many families, reflected in the number of phone calls and letters received by my office," he said.

"The issue was so important to the community that I raised the matter in my maiden speech to parliament, spoke and voted against it in parliament and quizzed the government about the logistics in collecting the fees.

"It is very pleasing to see Premier Nathan Rees take on board the concerns of parents everywhere and reverse what was clearly an unpopular decision," Mr Besseling said.

"The other positive from this decision is the security it gives some of our bus runs in town, which are partially subsidised through the government funding for the student travel scheme and are heavily relied on by our elderly residents as their only means of affordable travel."