An elderly Australian woman lay dead in her home for eight years before her body was discovered.

When she apparently vanished from view in Sydney in 2003, no one called the police. Not her relatives, her neighbours, or government officials, who kept paying her welfare benefits into a bank account that sat untouched.

New South Wales state police said that they discovered the woman's skeletal remains on Tuesday, after her sister-in-law finally called them to report that she had not heard from the woman - who would have turned 87 next month - since 2003.

"It's sad that the woman appears to have died several years ago without anyone noticing," said police Acting Superintendent Zoran Dzevlan.

Police were trying to determine exactly when the woman died, but did not think the death was suspicious.

The woman, whose name was not released by police, was a recluse who had no relatives except for her sister-in-law, Mr Dzevlan said. The two had a row in 2003 and never spoke again. Police have not said why the sister-in-law waited years to report the woman missing, or what prompted her to call now.

As the years passed, utility companies cut off the power and water to the woman's home. Centrelink, the government's welfare agency, continued to pay her benefits to her bank account, which remained untouched. Her post had been redirected to her sister-in-law's home before 2003, but eventually stopped. Neighbours told police they had not seen her in years and assumed the house was vacant.

Police said the woman's home was locked and furnished, but looked like no one had lived there for years.

"To hear today that an elderly lady can pass away, be dead for eight years and for Centrelink to still be sending checks to her bank account and for those cheques not to be cashed - surely that must set off the alarm bells within government," New South Wales Police Minister Mike Gallacher said.

"(It) really does highlight the need for this state and indeed our community to work closer at building relationships with our community," he said.

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