UPDATE: POLICE call off a search for two people near Wollongong in NSW after concluding reports of a sinking boat were mistaken.

Police were called to Wollongong Harbour at 6pm yesterday after witnesses reported seeing a small boat that appeared to be sinking and two people in difficulty in the water.

A search continued last night and and resumed at first light this morning.

But police say the search was called off at midday after police concluded there was no missing boat.