The NSW Bureau of Meteorology (BoM) warned that the Nepean Valley, which incorporates the major urban center of Penrith - part of Greater Western Sydney - was set to experience its worst flooding in 50 years as overflowing of the Warragamba Dam caused river levels to rise along the Nepean and Hawkesbury rivers.
On Monday, eight million residents were told to avoid unnecessary travel and work from home if possible, as some hard-hit areas received 25 centimetres (10 inches) of rain in 24 hours.
The rain submerging large swathes of the state contrasts with weather conditions a year ago, when authorities were battling drought and catastrophic bushfires.
The extreme weather causing havoc across southern Queensland is expected to persist for at least another day as roads are cut, schools closed and evacuations triggered.
The renewed rainfall means the worst is potentially yet to come, Premier Gladys Berejiklian said.
State Emergency Service deputy commissioner, Daniel Austin, told ABC TV that emergency crews had made 750 call-outs overnight on Saturday, and had responded to more than 4,500 calls for help since Thursday.
The state's Mid North Coast has been particularly badly affected, with Berejiklian declaring the region had been struck by a "one in 100 year" disaster.
The Upper Colo area in Sydney's west has been ordered to evacuate as the water levels of the Colo River, which feeds into the Hawkesbury, reach breaking point.
Australia's defence force will join relief efforts Tuesday, the government announced, with two search-and-rescue helicopters being used to winch out people from in remote areas.
As a result of the ICA's call, insurance claims related to the floods will now be prioritised and property owners within the affected areas will have more recourse to support from their banks and insurers.
PM Morrison has offered a one-off federal government payment of A$1,000 ($775; £560) per eligible adult and A$400 per eligible child for those seriously affected by the floods.
Major flooding similar to the 1988 and 1990 flood events is occurring along the Hawkesbury River while the Bureau of Meteorology is forecasting heavy rainfall to continue today.
Following days of rain that started Tuesday, the NSW Rural Fire Service said many areas in the province "resemble an inland sea".
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