VH-RBJ (Cessna 310) was proceeding on an IFR flight from Lismore to Cooranbong at 8,000 ft and had passed Coffs Harbour at 1719 hours with an estimate for Taree at 1752 hours. VH-MML (Beech 1900D) had departed Sydney at 1718 hours on a regular public transport flight to Port Macquarie. It was maintaining flight level (FL) 230 and was estimating Taree at 1751 hours. Sydney Flight Service Sector 4 (SEC 4) was operated by one flight service officer (FSO) who considered the workload moderate. The officer had several flight progress strips (FPS) in his flight progress board (FPB) including one on a Beech 99 that was overflying Taree at 7,000 ft with an estimate there of 1745 hours. When the FSO assessed the traffic situation he gave great consideration to this aircraft but finally decided that it would not effect the other two and elected to pass 'no traffic' to VH-RBJ and VH-MML. He was aware of the possible conflict between these two aircraft but thought he would wait for an update on the position of VH-MML before making any decisions on the matter. He subsequently lost an awareness of the traffic situation and convinced himself that all conflicts in his area of responsibility had been advised to the pilots. The FPS on VH-RBJ was still in the Coffs Harbour bay of the FPB but should have been transferred to the next most southerly bay in the geographical layout. At approximately 1740 hours the crew of VH-MML contacted SEC 4 and received the advice of no traffic. At 1751 hours they then asked SEC 4 if there was any traffic at Taree and the FSO immediately reassessed the situation and realised that the conflict existed. As he was about to inform the pilots of the confliction the pilot of VH-RBJ reported that VH-MML had passed through his level within 2 NM. Both pilots stated that they did not see each other prior to passing. No traffic on each other was passed to either crew prior to the occurrence. Significant Factors 1.The FSO forgot that the conflict between VH-MML and VH-RBJ still existed after deciding to delay the traffic alert decision until an update position on VH-MML had been received. 2.The FSO did not transfer the FPS on VH-RBJ to the correct position on the FPB. 3.The closing speed of the aircraft made an unalerted see and avoid action unlikely.