Australia's weather bureau had warned that Tropical Cyclone Hamish could cause substantial damage and flooding, with the storm at its height packing winds of up to 295 kph (177 mph).
Around 3,000 people are being evacuated from Fraser Island, two-thirds of them tourists, a spokesman for Queensland state's emergency services minister told Reuters.
"They are being moved off the island by barge. The process has been under way most of the day," the spokesman said.
Evacuations had been ordered at other islands as well, he said.
The Bureau of Meteorology has downgraded Hamish to a category 4 storm, the second highest level, but it still warned late Sunday that flooding and wind damage were likely to occur, with wind speeds of up to 260 kph.
Flooding could occur along parts of the mainland coast on Sunday and later in the week, the bureau said on its website (www.bom.gov.au). Despite some reports of flooding, the damage reported from the cyclone so far has been limited.
State Premier Anna Bligh has declared a "disaster situation" in response to the storm.
The cyclone was on the opposite coast from the oil and mining regions of the northwest.
Australia is the world's third-biggest sugar exporter and sugar farmers in Queensland, who produce 95 percent of the crop, are already facing substantial losses. Thousands of cattle are also estimated to have perished in earlier flooding.
Queensland has been battling major floods since December 2008 after a series of storms and cyclones. (Editing by Sugita Katyal)
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