Investigators will speak with neighbours and other family members.
Detective Superintendent Danny Doherty was reluctant to detail the dynamics of the family but said police believe the alleged attack took place in the family home.
“They were the only children in the house,” the veteran homicide detective told reporters on Tuesday.
“It is very hard to imagine, it is unthinkable that this could happen to a 10-year-old.”
The attack appeared to have occurred “completely out of the blue”, Det Supt Doherty said.
“My thoughts go out to the mother at home having lost a 10-year-old in a tragic loss a life, and now has another daughter facing court allegedly responsible for killing the 10 year old so this is terrible situation for her to be in,” he said.
Police Deputy Commissioner of Regional NSW Field Operations Paul Pisanos said emergency responders tried to revive the girl.
“Emergency services did try for some time to try and revive the child, but unfortunately they were unsuccessful and the child was deceased,” he told Sydney radio 2GB.
Local MP Greg Piper said the tragedy had impacted two school communities and devastated everyone in the Lake Macquarie area.
“The family and the community will live with the implications of this for many years to come,” he told AAP.
“Wherever I and my office can provide support, we will.”
The older sister has been refused bail and will appear at a children’s court today.
“It is just beyond words,” a neighbour told the Sydney Morning Herald.
“We are grieving.”
Another neighbour told the Newcastle Herald that they never expected such a horrific incident in their neighbourhood.
The Daily Telegraph reports that police are now looking into any possible history of mental illness in the family.
The girl will appear next at Broadmeadow Children’s Court on June 24.
