Thousands of people on Australia's east coast were cut off by floodwaters on Sunday, with the heavy rain claiming two lives as extreme thunderstorms damaged homes and brought down trees in Sydney.

State Emergency Services said the Macleay River peaked lower than had been forecast in the northern New South Wales town of Kempsey, 350 kilometres (215 miles) north of Sydney, and the town appeared to have escaped major flooding.

But the north coast region, including the towns of Port Macquarie and Taree, remained under close watch along with the Hawkesbury-Nepean area west of Sydney.

"In most other areas floodwaters are falling," State Emergency Services said in a statement.

"Isolation remains 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."

The SES said it had undertaken 66 flood rescues, 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, to collect 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.

"Damage included a trampoline blown into powerlines, trees and branches down and roof damage," the SES 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.

Those floodwaters prompted scores of helicopter rescues and isolated tens of thousands of people at their peak.