The by-election was triggered by the resignation of the sitting member, the Australian Labor Party's Stephen Martin on 16 August 2002.

Cunningham had been held by Labor since its creation 52 years previously, but a recent local government election for Lord Mayor of Wollongong had seen the Labor candidate lose to an independent, Alex Darling, causing concern in the ALP about their ability to hold the seat given the expectation of a significant protest vote against them.

The Liberal Party of Australia received 28 percent of the primary vote at the previous election, they chose not to run a candidate in the by-election.

Asymmetrical preference flows in the absence of an official Liberal candidate contributed to Labor losing the seat, with their 2CP being reduced by 12.9 percent.

However, other factors attributed by some to the loss include Martin's premature departure, a messy preselection process for Bird, and discontent from the NSW Labor branch towards federal leader Simon Crean.