Yes, it's been talked about for well over a decade. The prefered site is Badgeries Creek, which is South West of Sydney CBD. If you look at a map of Sydney and find Liverpool (more or less west of Mascot ie. Sydney Airport), Badgeries Creek is slightly west of Liverpool, but it's a tiny place that often doesn't appear.
Also Holdsworthy has been mentioned (also more or less west along the railway line from SYD) where there was once a huge Army Site, but that had been thrown out.
Politicians are currently in favour of extending the proposed TGV high speed rail line beyond Canberra and onto Melbourne, thus ending SYD-MEL flights and freeing up lots of slots. But that too is unlikely to happen anytime soon.