Massive fires have swept bushland north of Sydney edging closer to a tiny beach village to its south.
Australia's 100 or so "black Christmas" fires have been raging for 13 days.
Almost half have been started deliberately, many by bored teenagers and children. Police have arrested 23 suspects, including a nine-year-old boy.
Officials say the fire crisis is one of the worst on record. State premier Bob Carr suggests that police should compile a formal register to identify known firebugs.
He said: "I don't think we can be tough enough with people who go out and light fires and get a sense of fulfilment out of the damage, the destruction and even the loss of life they've caused."
Weather experts say temperatures have dropped to around 26°C after climbing above 38°C earlier this week. Humidity also rose after a string of dry days.
However, they say temperatures will soar again soon, bringing dry Outback winds. These conditions have given life to blazes which have destroyed 170 houses and scorched more than 1.2 million acres since Christmas Eve.
Sydney has been shrouded in smoke haze and a white ash fell over its suburbs and downtown.
Thousands of people have been evacuated from their homes, with most returning soon after the immediate danger passed.
Fire crews have taken advantage of kinder weather to prepare for next week's feared onslaught.
PA