Sydney, shrouded in a pall of smoke from a 600 km ring of fire encircling the city, decided to see in the New Year in with a bang Monday.

But fire chiefs warned the relative calm of the last two days left no room for complacency as hot, blustery winds again threatened some houses on the outskirts of Sydney.

More than 500 people at Hill Top, 100 km southwest of Sydney, were evacuated as a precaution as a

fire drew closer to the village.

A police spokeswoman said the fire had become erratic, breaking off in fingers, forcing the exodus of around half the township but fire services said they were confident of protecting property.

"We have a lot of work still to be done and it's not yet time to relax and say it's over," said New South Wales Rural Fire Service Commissioner Phil Koperberg who warned the fires -- now numbering about 70 -- could blaze for the rest of the week.

"We expect if we have one and a

half days of the weather we are now experiencing then we will see a breach of the containment lines and we will have to go back to concentrating our resources on property protection," he added.

"So, as we have been suggesting all along, the relative lull, and it is relative, that we've enjoyed and used to consolidate positions in the last two or three days has been just that -- a lull in proceedings.

"This is a long campaign and people need to remain vigilant," he warned.