A woman whose home was flattened by a stolen bulldozer has described how she and two other people escaped moments before the building was demolished at Teralba, south-west of Newcastle.

A 48-year-old man was arrested at the scene after allegedly using the bulldozer to flatten four cars and chase a man who had been sleeping in a shed before destroying the weatherboard cottage.

Deborah Kerr said she saw the man in the bulldozer after going outside to investigate "banging" noises she thought were coming from a garbage truck, about 7:30am on Monday.

Deborah Kerr said she took refuge in a neighbour's house as her own home was destroyed. ( ABC News )

"He screamed at us, we ran back in, locked the doors, the bulldozer went quiet and idle, we looked out the window, and when he [saw] us he abused us again and lifted up the bucket on the bulldozer and came straight for the house," she said.

"We just ran from the front door screaming.

"We felt the house lifting as we got to the front steps. We were just on the verandah, coming out the front verandah, when the house started to lift."

The woman said she feared for her life.

"You could tell he wasn't going to stop at nothing," she said.

The bulldozer became stuck after destroying the weatherboard cottage. ( ABC News: David Marchese )

Inspector David Matthews said the ordeal ended when a police officer climbed onto the bulldozer after it became bogged.

He used an emergency stop button to turn it off before he and another officer arrested the driver, he said.

"He couldn't get into the bulldozer because the doors were secured so he smashed the window of the bulldozer and delivered an entire can of OC spray (pepper spray) into the cabin, which incapacitated the driver," Inspector Matthews said.

"Our inquiries indicate that, initially, there was a 29-year-old male asleep in a shed at the back of the premises," he said.

"When he heard the bulldozer coming over the top of the cars, he came out of the shed.

"It'll be alleged that the bulldozer driver drove the bulldozer at him and [the victim] has run into the backyard of the premises and climbed over the back fence and ran into a paddock, where he sought shelter."

Inspector Matthews said the man then drove the bulldozer through the back of house.

Mining company Glencore said the bulldozer was taken from its Macquarie Coal Preparation Plant in Teralba on Sunday night.

Inspector Matthews said the man, from nearby Boolaroo, had previously lived with the family.

He was charged with 17 offences, including destroying or damaging property with intent to endanger life and breaching an apprehended violence order.

He is expected to appear at Newcastle Local Court on Tuesday.