Thousands of people on Australia's east coast were cut off Sunday by floodwaters which have claimed two lives, while violent thunderstorms and a series of reported "mini-tornados" destroyed homes south of Sydney.

State Emergency Services (SES) said the worst of the flood crisis in the north of New South Wales state appeared to have passed, with the waters mostly beginning to subside by Sunday afternoon.

"The rivers up north have pretty much peaked or are peaking," an SES spokeswoman told AFP. "Everything is pretty much on the way down."

The Macleay River peaked lower than had been forecast in the town of Kempsey, 350 kilometres (215 miles) north of Sydney, and the town escaped major flooding.

Further south in the town of Port Macquarie some low-lying areas were inundated by the low pressure system which travelled down the coast and has swollen river systems from Sydney to Queensland state.

The State Emergency Service said isolation remained a concern "with around 20,000 (people) cut off across the north and mid-north coasts".

"The New South Wales SES is monitoring isolated areas and will provide resupply or medical evacuation if required," it said in a statement.

The SES said it had undertaken 70 flood rescues since the severe weather began, including from stranded cars, and Prime Minister Julia Gillard urged the public to avoid the floodwaters if possible.

"Water is a dangerous thing. Deceptively dangerous. Even very low levels of water, if it's fast moving, can sweep people away," she said.

A 17-year-old boy was swept into a drainpipe on Friday as he stood in waist-high water in Kew, near Port Macquarie, while collecting golf balls.

On Saturday the body of a man was found in his submerged car on a road about 20 kilometres northwest of Grafton, also on the New South Wales north coast.

Intense storms bringing high winds and heavy rain also tore through eastern Sydney and other areas overnight, ripping off roofs and bringing down trees.

"Local intense storms with reported 'mini-tornados' in some locations caused... significant damage," the SES said, adding the worst-hit areas were Sydney's east, the southern fringe suburb of Narellan and Kiama further south.

In Kiama, a coastal town about 100 kilometres south of Sydney, several homes were destroyed by the powerful storm, with a further seven suffering major damage, the SES spokeswoman said.

The latest deluge comes just weeks after torrential rains in the wake of tropical cyclone Oswald flooded parts of Queensland and neighbouring New South Wales, and as a cyclone is expected to land on Western Australia within days.

Residents between the coastal communities of Port Hedland and Broome, in Western Australia's north, have been alerted that a tropical low was Sunday about 400 kilometres north of Port Hedland and was likely to become a cyclone.

"During Monday the system will continue to intensify and there is a high risk that it will cross the coast as a severe tropical cyclone on Tuesday or Wednesday," the Bureau of Meteorology said.