Firefighters in Australia battled hot, dry winds and soaring temperatures Wednesday as new blazes were whipped up in a week-long bushfire emergency, but fears of a catastrophe eased.

With the crisis in its seventh day, some 71 fires were raging across an area with a perimeter of 1,600 kilometres (992 miles) in New South Wales state and 29 of them were uncontained.

Warnings were again issued for people to be extra-vigilant, although there were no reports of more property being lost.

"There are still fires flaring up, impacting on communities," said NSW Rural Fire Service Commissioner Shane Fitzsimmons, who added that he will "not rest easy until we start seeing some really good further consolidation of control lines and bringing these fires more under control".

But he said their worst fears in the Blue Mountains region west of Sydney, a popular tourist area home to 75,000 people where three huge infernos have been burning for days, had eased.

While one of the blazes, in Springwood where more than 100 homes were lost last week, was threatening houses and upgraded to the highest "emergency" level, it was later downgraded with residents who fled the mountains told it was safe to return.

"If you have been someone that has chosen to depart the Blue Mountains today, to be out of harm's way, then it would be safe to head back home tonight because the risk has been averted," Fitzsimmons said.

Fire officials said their high-risk strategies of aggressive backburning, building containment lines and strategic planning had paid dividends.

"It is absolutely wonderful it did not run," the fire chief said of two massive blazes around the Lithgow and Mount Victoria areas that were deliberately merged into one on Tuesday in a desperate attempt to better manage it.

The huge Lithgow area fire has a perimeter of more than 300 kilometres and late Wednesday the fire service said it was sparked by a military training exercise.

"An investigation has concluded the fire started as a result of exploding ordnance on the range on Wednesday," a fire service spokesman said. The Defence Department declined to respond.

While averting a major disaster in the mountains, fires broke out elsewhere around the vast state. A blaze at near Newcastle north of Sydney closed the main freeway that links the two cities and sparked traffic chaos.

Another inferno near Lake Macquarie, to the northwest of Sydney, also burned aggressively with water-bombing aircraft attempting to bring it under control, although high winds hampered the effort.

"It's a very fluid situation. It's a very dynamic situation," said the fire chief ahead of cooler weather due on Thursday, although winds will remain strong with no rain in sight.

So far more than 124,000 hectares (306,000 acres) of land has been burnt across the state and more than 200 homes destroyed. But only one person has died as residents heed advice either to flee or head to evacuation centres.

Temperatures hit the mid-30 degrees Celsius range Wednesday. Coupled with low humidity and wind gusts of up to 100 kilometres (62 miles) per hour Fitzsimmons had called the conditions "as bad as it gets".

Drizzle overnight "settled down firegrounds" but it also hampered the mostly volunteer crews in their backburning, a tactic aimed at creating firebreaks to control the path of blazes.

This was a key focus of operations, but the light rain meant many firefighters had to be withdrawn from forest trails due to fears that their trucks could get bogged down.

While the worst appears to have passed, New South Wales Premier Barry O'Farrell warned "we're not out of the woods yet".

He also said reports were filtering in of people trying to cash in on other people's misery, with one landlord raising the rent for his property in the Blue Mountains because so many other homes had been lost.

"The last week has been characterised by communities and volunteers coming together to fight fires and support people and then you are pulled up by these acts of what I describe as bastardry," he said.