More than 400,000 chickens on an egg farm in Young, in south-west New South Wales will be destroyed, after lab tests confirmed a strain of bird flu.

Eighteen thousand of the hens have already died on the farm near Young, which is under quarantine.

About three million eggs are left on the property and can't be used or sold.

The New South Wales Department of Primary Industries is making preparations to cull the whole flock, but it says there's no sign the virus has spread beyond the infected property.

Testing at the CSIRO's Australian Animal Health Laboratory confirmed the H7 strain of bird flu earlier this week.

The Federal Department of Agriculture has reported the incident to the World Organisation for Animal Health.

But lab director Kurt Zuelke says it's highly unlikely the outbreak will cause a quick reaction from countries which import Australian poultry products.

"Probably most countries would watch this, it's hard to say their response," he said.

"Like I say, this isn't the terribly unusual event and outbreak, the way this one has materialised.

"I'd anticipate they'd probably take a wait and see attitude."

The Department of Agriculture says some countries could restrict imports of Australian poultry products, but it's still assessing the trade implications and trying to minimise them.