Early reports of damage in wake of Australia's Cyclone Debbie

By Tom Westbrook

SYDNEY, March 29 (Reuters) - The Australian army headed into areas hardest hit by Cyclone Debbie and tens of thousands of homes remained without power as dawn broke on Wednesday amid reports of substantial damage in some areas.

Debbie ripped a trail of destruction through northeast Australia on Tuesday as a category four storm, one rung below the most dangerous wind speed level, before being gradually downgraded through the night to a tropical low.

Thousands of people took shelter as tourist resorts along the world-famous Great Barrier Reef and mainland coastal areas were belted with wind gusts stronger than 260 km per hour (160 mph).

There were early reports of significant structural damage to homes and public infrastructure after howling winds, heavy rain and huge seas. Two people were injured, one with serious head injuries after being hit by a falling wall, police said. More than 51,000 homes were without power.

Queensland state premier Annastacia Palaszczuk said it appeared the worst-hit areas were the tourist magnet of the Whitsunday Islands off the coast and Airlie Beach and Proserpine, some 900 km (560 miles) northwest of the Queensland capital, Brisbane.

"It's been absolutely smashed. You can't get out or in there's so many trees down. There are boats all over the harbour," Jon Clements, who was holidaying on Hamilton Island when the storm hit, told Reuters.

Wind gusts of 262 kmh, the highest during the storm, were recorded on Hamilton Island, so it was expected to be hit hard, although its resorts were designed to withstand category 5 storms.

Palaszczuk said she would be briefed on damage at an imminent emergency services meeting. The storm was declared catastrophic by the Insurance Council of Australia.

She (Munich: SOQ.MU - news) said the defence force would fly over the area for an assessment as soon as it was safe to do so. The tropical low continues to bring winds and heavy rain and flood warnings are in place in several areas.

"Our main priority is to get that level of assessment done and then to pinpoint where our emergency services personnel need to get in there and fix things as quickly as possible," she told Australian Broadcasting Corporation radio.

Cyclone Debbie made landfall at Airlie Beach, north of Proserpine, shortly after midday local time (0200 GMT) on Tuesday, knocking out telephone services.

Authorities had urged thousands of people in threatened areas to flee their homes on Monday, in what would have been the biggest evacuation seen in Australia since Cyclone Tracy devastated the northern city of Darwin on Christmas Day, 1974.

(Reporting by Tom Westbrook; Writing by Jane Wardell; Editing by Toni Reinhold)