Mines, rail lines and coal ports were closed in Queensland state as Cyclone Yasi headed towards the coastline. Up to a third of Australia's sugar crop was also under threat, officials said.
"This storm is huge and life threatening," Queensland Premier Anna Bligh said, warning the system was still intensifying and picking up speed on its path from the Coral Sea, with destructive winds expected on Wednesday morning.
Cyclone Yasi is expected to generate winds of up to 280 kph (175 mph) when it hits the northern coast of tropical Queensland state early on Thursday, matching the strength of Katrina, which devastated New Orleans in 2005.
With a strong monsoon feeding Yasi's 650 km-wide front, the storm was also expected to maintain its intensity long after smashing into the coast and could sweep inland as far as the outback mining city of Mt Isa, some 900 km (600 miles) inland.
More than 400,000 people live in the cyclone's expected path, including the cities of Cairns, Townsville and Mackay, which are also key tourist areas and take in Australia's Great Barrier Reef.
Queensland, which accounts for about a fifth of Australia's economy and 90 percent of steelmaking coal exports worth about $20 billion a year, has had a cruel summer, with floods having swept the eastern seaboard over the past month, killing 35 people.
"There's no time for complacency," said Mike Brunker, mayor of the Whitsunday area near the Great Barrier Reef.
"People in low-lying areas are evacuating to friends and family or, if they have to, leave town."
Satellite radar images showed Yasi as a massive storm covering almost the entire Coral Sea and moving towards Australia from near Vanuatu.
Among the areas in its path is the small tourist area of Mission Beach, which was flattened by Cyclone Larry in 2006.
"It's a beautiful day today, but all of the tourists have now gone and we're just preparing everything for the cyclone," Mission Beach resident Elvira Montgomery told Reuters.
"They are warning of a four metre tidal surge, so everything might all end up under water."
Authorities said Cyclone Yasi could be the most destructive cyclone to hit the area. A sugar industry official said it could threaten around a third of the state's sugar cane crop.
Island resorts in the Whitsundays and parts of the tourism hub of Cairns and military town of Townsville were being evacuated along with other areas in the danger zone, between Cooktown in the north and near Mackay, a port, further south.
Military C-130 transport aircraft also evacuated the main hospital in Cairns. Extra commercial flights were scheduled to cope with an expected exodus of holidaymakers and residents.
Police were also empowered to forcibly move people from danger zones.
"This is not a system that's going to cross the coast and rapidly weaken out," Bureau of Meteorology senior forecaster Gordon Banks said, warning winds could reach up to 280 kph and the storm could reach Mt Isa, 900 km inland.
"We could see this system pushing well in across northern Queensland as a significant tropical cyclone with damaging winds and very heavy rainfall," Banks said.
Coal industry on alert -- again
Queensland's coal industry, only just recovering from recent record floods, went back on alert on Tuesday, with at least one major mine closing down temporarily and rail operations suspended as the industry braced for the cyclone.
The country's largest coal freight company, QR National, temporarily closed two rail networks: the major Goonyella network, feeding into the export terminals of Dalrymple Bay and Hay Point, and its smaller Newlands line taking coal to Abbot Point, a company spokesman said.
Global miner Rio Tinto shut its Hail Creek coal mine with the approach of the cyclone.
Queensland's coal mines are mostly inland and are still struggling to pump water out of their pits after flooding.
The Queensland Resources Council, an industry body, estimated coal miners would take until March to return to normal, even without the impact of cyclones.
Bligh said Yasi had the potential to cause powerful and deadly flash flooding in coastal areas. Most of the state's major coal ports were temporarily closed to shipping.
But she said the storm track had shifted slightly north, meaning flood devastated and coal mining areas of central Queensland may escape the worst of cyclonic rains.
"If there is any silver lining here, the movement of the cyclone slightly north has meant that when it travels west and moves inland, it is less likely to drop all of that massive rainfall into the central Queensland catchment areas that have already experienced flooding," Bligh said.
Last month's floods swamped around 30,000 homes, destroyed roads and rail lines and crippled Queensland's coal industry, with up to 15 million tonnes of exports estimated to have been delayed into the second half of this year.
Cyclone Yasi is expected to classified a "category 4" by the time it reaches the coast, similar to Cyclone Larry which hit the town of Innisfail in 2006, levelling sugar crops and causing A$1.5 billion worth of damage.