Australia's deadliest wildfire has killed at least 108 people, some as they fled in cars or as they huddled in houses when the inferno engulfed rural towns in the country's southeast.

The fire storm tore through several small towns north of Melbourne last night destroying everything in its path.

One family was forced to dive into a farm reservoir to survive while others took refuge in a community shed with firefighters standing between them and a wall of flames.

A badly burnt man in the town of Kinglake, where there were many fatalities, was kept alive for six hours by being partially submerged by friends in a pool until help arrived.

The remains of charred cars littered the smouldering towns, about 80km north of Melbourne today. Some vehicles had crashed into each other as their drivers frantically tried to escape the fire.

‘Out there it has been hell on earth,’ Victoria state Premier John Brumby said in a television address.

Police said the toll could continue to rise as they search the ruins of the wild fires and with 20 people with serious burns in hospital.

Thousands of firefighters were still battling dozens of fires in Victoria and New South Wales state.

Victoria Police Chief Commissioner Christine Nixon said some of the fires may have been deliberately lit.

The previous worst bushfire tragedy was in 1983 when 75 people were killed in the ‘Ash Wednesday’ fires.

‘Hell and its fury have visited the good people of Victoria,’ Australian Prime Minister Kevin Rudd said.

He has announced a Aus$10 million (€5.21m) aid package for the region.

Firefighters said about 750 homes had been destroyed in the fires across Victoria state so far this weekend, the vast majority in the worst-affected areas north of Melbourne.

Wildfires are a natural annual event in Australia, but this year a combination of scorching weather, drought and tinder-dry bush has created prime conditions for blazes to take hold.