The Bureau of Meteorology warned on Monday severe thunderstorms were possible for the entire coastline and likely for some inland regions.
By lunchtime, the area of most concern stretched from the Victorian border to beyond Dubbo in the north, taking in Orange, Canberra, Yass, Parkes, Wagga Wagga and Albury.
"Severe thunderstorms are likely to produce damaging winds, large hailstones and heavy rainfall that may lead to flash flooding in the warning area over the next several hours," the bureau said in a statement.
On Sunday night floods prompted multiple rescues and calls for help as thunderstorms brought hail, damaging winds and widespread heavy rain.
Acting Assistant Commissioner Allison Flaxman said most of the rescues involved vehicles trapped in flood water.
"We also had several reports of buildings impacted by the flash flooding, with water leaking through roofs and under doors into garages and car parks," she said.
"SES members assisted with sandbagging and clean-outs.
"Fortunately there were no reports of significant injuries or major damage from the flood rescues."
Premier Chris Minns thanked emergency workers for their hard work.
"There's been some really strange weather over the last couple of days, from bushfires to storms," he said.
"There's been tens of thousands of volunteers for the RFS and State Emergency Services who've been working around the clock to keep us safe, to repair communities so they can have a Christmas together."
Motorists are being urged not to try to drive through flooded roads and to seek alternative routes. (Tracey Nearmy/AAP PHOTOS)
Several flights were cancelled out of Sydney Airport on Christmas Day after the downpours caused disruptions the night before.
SES volunteers spent Christmas morning continuing to help clean up after storms ravaged parts of the Northern Rivers, Metropolitan Sydney, Illawarra, South Coast and Riverina.
The eastern Sydney suburb of Little Bay copped 56mm of rain in one hour.
The SES was called to 492 incidents on Christmas Eve, 313 of them across Sydney.
Sunday's storms were widespread up and down the coast, with hail up to 10cm in diameter reported near the Queensland border.
Thousands of properties lost power in southeast Queensland after supercells rolled across the state on Sunday afternoon.
The bureau's Angus Hines said the wet would continue for days along with the threat of more severe thunderstorms.
"There is the potential in the atmosphere at the moment for generating these large storms," he said.
"There's a chance of thunder or maybe even severe storms for Brisbane, Sydney, Canberra and Melbourne."
Ms Flaxman said crews were prepared for a busy stretch and urged people to take care.
"It is critical people assess the conditions of not only their route but their destination before travelling and avoid camping in low-lying areas," she said.
"If you come across flooded roads, please turn around and find an alternative route.
"Never drive through flood waters."
She said flood rescue teams were positioned for the coming days.
The bureau has issued a flood watch for parts of the south coast through to the Upper Murrumbidgee.
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