Politicians joined volunteers around the country to scoop peas, ham and potatoes onto plates for people who would have otherwise gone without.
Prime Minister Anthony Albanese said Christmas was a time of giving as he lent a hand at the Reverend Bill Crews Foundation Christmas lunch service in Ashfield, Sydney.
"What we're seeing here is Christianity in action," Mr Albanese told 2GB.
"It's helping people out, helping the vulnerable and bringing some joy to people's lives."
For Stuart and Veronica, the Wayside Chapel's annual Christmas Day street party was a great way to spend the holiday without family nearby.
"It's just great to sit down amoung people and see them having a good time," Stuart told AAP at the outdoor lunch in Sydney's Kings Cross.
NSW Premier Dominic Perrottet applauded the Wayside Chapel volunteers and staff behind the free lunch that was expected to feed hundreds, including many who were sleeping rough.
"Christmas is about love and that's what we're seeing today," he told reporters in Sydney.
But charities are struggling to keep up with soaring demand for goods and services as the cost of living crisis continues to financially cripple households.
Pastor and CEO of Wayside Chapel, Reverend Jon Owen, said homelessness and food insecurity were on the rise.
"Sadly, we know that youth homelessness is also increasing around Australia, with nearly one in 20 teenagers facing homelessness during the pandemic," he said.
He also said the work to support the homeless did not stop "when the tinsel and tree comes down", and urged Australians to keep donating to support the vulnerable in the community.
Salvation Army Major Bruce Harmer said rising interest rates and inflation meant millions of Australians sadly went without this Christmas.
"The cost of living is impacting everyone," he said.
The Salvation Army has seen unprecedented demand for food hampers, meals, Christmas gifts and accommodation nationwide.
The organisation planned to distribute more than 64,000 hampers and vouchers along with hundreds of thousands of Christmas gifts and toys.
Around 136,000 meals were served during the Christmas period through homelessness services and about 68,000 beds were reserved for those in need.
As more Australians tighten their belts in response to rising inflation, some donations have slowed.
The Smith Family received generous donations for its annual Christmas appeal yet the charity has struggled to reach its $5.6 million goal this year.
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