UPDATE: The crossing supervisor who was on duty at the time of an accident in South Grafton this morning said the intersection was a black spot for speeding drivers.
Michelle Hall witnessed the accident at the corner of Bent and Hyde streets, which is located within the school zone at Gillwinga Public School.
"A brown car sped out of Hyde street and hit the rear of the white vehicle and sent it spinning into the back wheel of the bus," Ms Hall said.
"I looked at the driver of the brown car and he backed up and I thought he was going to pull up but then he turned around and took off.
"Speeding cars are always a problem here. Just prior to this accident there was a car going through the crossing that must have been doing 80 kilometres per hour.
"The problem is that it is a bit out of town and they seem to forget the speed limit.
"It makes it a bad intersection."
Police at the scene confirmed all 12 school students on board the school bus involved were wearing seatbelts and were uninjured.
The bus had come from Minnie Water and was about to drop the students off at Gillwinga Public School.
9.30AM: POLICE are looking for the driver of a brown sedan who sped away from an accident in South Grafton this morning.
Bent Street was blocked after the sedan hit the back of a white Holden Commodore station wagon, sending it spinning into the side of a school bus near the intersection with Hyde Street.
8.50AM: Bent St has been blocked by an accident involving school bus and white Holden Commodore station wagon.
The crash occurred in the school zone adjacent to Gillwinga Public School during the morning peak hour period.
SES and Fire and Rescue NSW also attended the scene.
There were no reports of injury.