Sydney is facing a "catastrophic" fire threat, authorities said on Sunday, as firefighters in eastern Australia raced to prepare for worsening conditions after ferocious bushfires devastated communities.

A helicopter drops water to douse bushfires along the Linksview Road near Faulconbridge in the Blue Mountains on Wednesday. Firefighters in Australia battled hot, dry winds and soaring temperatures on Wednesday as new blazes began breaking out in a week-long bushfire disaster that shows no signs of easing. Photo: AFP

Fires have killed three people and razed more than 150 homes since Friday, but cooler weather overnight provided a welcome reprieve for firefighters and residents.

Authorities were assessing the damage on Sunday, with more than 100 fires still burning across New South Wales and Queensland, including several blazes that remained out of control.

Wider swathes of the states - including greater Sydney - are now bracing for perilous fire conditions predicted for the coming days, as is Western Australia state.

It is the first time Sydney has been warned of a "catastrophic" fire danger, the highest possible level, since the grading system was introduced in 2009.

Massive fires tore through several towns on Friday and Saturday.

The mayor of Glen Innes, where two people died, said residents were traumatized and still coming to terms with their losses.

"The fire was as high as six meters and raging with 80 kilometers-an-hour winds," Carol Sparks told national broadcaster ABC.

Five people reported missing have been found, but the unpredictable nature of the disaster means officials have not ruled out the possibility that others could still be missing, NSW Rural Fire Service spokesman Greg Allan told AFP.

In Old Bar, which was spared the worst when the wind changed direction, hectares of bush land had turned charcoal and small pockets of flames continued to smoulder.

Peter McKellar, 75, was clearing debris from his property as his neighbor's home sat in ruins.

"The firies [firefighters] saved ours," he told AFP. "They are doing a wonderful job. They're angels."

High temperatures, low humidity and strong winds forecast from the middle of the week are predicted to fuel blazes that authorities have warned they will be unable to contain ahead of time.

"We are ramping up for probably another 50 trucks full of crews to be deployed into New South Wales on Monday night ahead of conditions on Tuesday," NSW Rural Fire Service Commissioner Shan Fitzsimmons told reporters in Taree, one of the worst-hit areas. 

"We have seen the gravity of the situation unfold... What we can expect is those sorts of conditions to prevail across a much broader geographic area as we head into Tuesday."

In Queensland, where a state of emergency has been declared, more than 1,200 firefighters were battling over 50 active fires on Sunday.