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Crowds had been growing on the foreshore since early in the morning, to see more than 100,000 pyrotechnic effects and an animated display on the bridge.
Sydney's theme for this year is 'The Time of Our Lives'.
New South Wales police are warning revellers there will be extra officers, drug dogs and emergency service workers on patrol to keep the crowds under control.
Sydney police say the crowds have been generally well behaved so far, although at least three people have been taken to hospital.
A teenage girl suffered serious injuries after falling 10 metres from a balcony at a unit at Milson's Point and two men have been taken to hospital after their dinghy collided with a speed boat at Jerusalem Bay in Sydney's north.
Victoria
Nearly half a million people have welcomed the New Year at Federation Square and other parts of Melbourne.
The city has recorded its highest temperature for 2007, reaching 41.1 degrees just before 5pm AEDT.
With temperatures still in the high 30s, police and emergency services are warning revellers to keep cool and drink plenty of water.
Meanwhile, police say they hope there is not a repeat of last year's violent clashes at Rye on the Mornington Peninsula, where revellers threw bottles at officers.
The police association says officers will not approach groups of 50 or more people, after a decision not to allow them access to helmets for better protection.
In Queensland, the Gold Coast and Ipswich have cancelled their displays due to bad weather conditions.
However Brisbane's early family fireworks still went ahead and organisers were expecting to continue with the midnight fireworks as planned. - By ABC Australia Copyright