The pilot of a light plane that crashed into a ferris wheel at a fair on the New South Wales mid-north coast says he simply did not see it.

Four people, including two children, had to be rescued after the plane crashed into the wheel at the Old Bar Festival about 10:00am (AEST) on Saturday.

All four walked away unscathed.

Local pilot Paul Cox was flying with his son-in-law when he failed his first landing attempt on the airstrip next to the festival.

When he turned the plane around, he crashed into the ferris wheel.

Two children had to be rescued from a basket at the top of the ferris wheel and Mr Cox and his son-in-law were rescued after dangling from the top of the wheel inside their plane for more than an hour.

Taree Mayor Paul Hogan says it is amazing no one was killed.

"I had to open the ceremony and I said we've witnessed a miracle here today," he said.

"It could have been far worse.

"If [the ferris wheel] had toppled over, boy oh boy."

Emergency workers have managed to remove the plane, which was wedged in the ferris wheel for hours.

The plane had been leaking aviation fuel and emergency services had to spray the area with foam. There were also fears the ferris wheel could topple over.

Witnesses described hearing a "crunch" as the plane hit the wheel.

Lorraine was watching the aircraft from a viewing platform.

"He'd gone in and made a landing and then I heard him taking off again so I turned around to watch him come, because he was going up a pathway [that] took him over the top of the ferris

wheel," she said.

"And as I turned around to watch him I thought 'Christ he's low, he's coming in low over that' and next thing bang he went straight into it.

"And the only thing that stopped anything else happening was a support bar of the ferris wheel - that sort of went in between the struts of the wing."

Festival goers look on as the plane dangles from the top of the ferris wheel. ( User submitted via Twitter: Rimian Perkins )

Rescue operation

Rimian Perkins was also at the scene of the crash and told ABC News Online that rescue crews had to use a crane and a cherry picker to free those trapped.

"They're lifting this big crane at the moment and it's like an industrial crane," he said.

"I imagine they're just trying to secure the ferris wheel. The rescue guys have tied it down at the bottom but it could topple at any second."

He says the two children sat patiently while they waited to be rescued.

"Apparently there were two people in the plane and the plane's pretty messy. Underneath the plane there's a lot of foam from the fire extinguisher so I don't think the people fell out of it, but I've heard they're okay."

Mr Perkins says the plane seemed to clip the ferris wheel as it tried to land.

"It was just like a big crunch," he said.

"It's pretty bizarre. I guess ferris wheels are stronger than they look. It must have been a low speed collision."

An investigation into the accident is now underway.