South Australia and Victoria states issued warnings of a "catastrophic" fire, after the temperature in Melbourne hit a record high at 37 degrees Celsius at midnight, making it the city's hottest night in 100 years.
Several of Melbourne's electricity suppliers said more than 30,000 households had suffered power outages after transformers failed in the extreme heat, local media has reported.
The city's train network was also disrupted by heat-related line problems and there were complaints of air-conditioning failing to function on some trains.
Melbourne residents, unable to sleep from the heat, flocked to the beaches with their cold beers and had a night swim.
"I wasn't terrified, I was mad at them, anything. I was tired and I couldn't sleep because it was just claustrophobic. I don't want to go through another night like that," said an elderly woman.
Meanwhile firefighters remained on high alert across rural Victoria, South Australia and New South Wales.
In South Australia The Australian newspaper reported that firefighters used trucks, water bombs and air cranes to battle blistering temperatures and northerly winds to bring several bushfires under control.
Cameron Lethlean of Australia's Bureau of Meteorology was quoted by ABC News as saying that relief is at hand with the changing wind direction.
"We're expecting the change [in the low-pressure trough] to reach the southwest of New South Wales later in the afternoon and not clearing through Victoria until later in the evening."
Richard Whitaker, a senior meteorologist for Australia's Weather Channel, told Reuters that northerly winds carrying heat from inland Australia was responsible for the high temperatures in Melbourne.
"[We] saw a period of northerly winds that's been dragging down very hot air from the interior of Australia," he said.
Whitaker said Australia had been experiencing an increasing trend of warmer temperatures for over the last 50 years.
"One very unusual season does not indicate global warming in any more than the cold snap in the Europe and the United States indicate global cooling, it is the longer term trends that emerge that really interest climatologists in that way.
"Over the last 50 years there is no doubt in Australia, we've seen a rising temperature trend," he added.