New South Wales police said they had established a crime scene at the beach in the eastern Sydney suburb of Maroubra after the grisly discovery today morning.
"A number of children were playing at the southern end of South Beach when they located the body of a baby in the sand," police said in a statement.
"Investigations into the child's death are continuing, however, the age and sex of the child is yet to be determined."
"The children were digging the child was buried under about 30 centimetres of sand," Holland told reporters.
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"The two young children reported to their father who was nearby, who in turn contacted police.
"Unfortunately due to the decomposition, we can't tell (the age of the baby) at this point."
Investigators were also unable to immediately say how long the body had been there, he said.
A post-mortem would be carried out to determine how the baby died, police added.
Randwick Mayor Ted Seng said South Maroubra was one of the area's more isolated beaches, but that it was patrolled by council lifeguards and volunteer surf life-savers.
"To say that I'm shocked is an understatement," Seng added in a statement. "I cannot imagine the circumstances that lead to this tragic event."
Last Sunday, a newborn baby was found crying at the bottom of a roadside drain in Sydney by passing cyclists, with police saying he had been in the 8.2-feet deep drain since Tuesday.