At least 173 people are now confirmed dead following wildfires in southeastern Australia.

The fires have now become the deadliest in Australia's history, destroying entire towns and wiping out families.

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Amid the heartache there was also anger as police revealed they suspected some of the fires were started by arsonists, whom Prime Minister Kevin Rudd accused of ‘mass murder'.

‘This is of a level of horror that few of us anticipated,’ he said.

Parliament suspended normal business to mark what Deputy Prime Minister Julia Gillard called ‘one of the darkest days in Australia’s peacetime history'.

31 fires are still burning in the southeastern state of Victoria, where all the deaths occurred, and nervous communities are on alert as the flames burned all in their path.

A number of the smouldering ruins are now surrounded by crime scene tape as police probe whether arsonists are to blame.

One village, which became an emblem of the fires when aerial pictures showed it razed to the ground, has been declared a crime scene for suspected arson.

Police have blocked cars from driving into Marysville in northeast Victoria, saying there are still bodies in the streets and the whole town is a crime scene, the national AAP news agency said.

In a home in the worst-hit town of Kinglake, north of state capital Melbourne, the charred bodies of four children were found huddled with that of an adult, believed to be a parent.

People died in their cars as they sought to escape the flames while others were burned to death in their homes.

Thousands of survivors are now jamming community halls, schools and other makeshift accommodation.