A defence force explosives exercise that sparked a destructive Blue Mountains bushfire should not have occurred on a day of high fire danger, an inquiry has heard.

But those conducting the exercise at the Marrangaroo Training Area near Lithgow last year were not aware of that situation.

The live explosives training exercise on October 16 ignited the State Mine fire that tore through more than 50,000 hectares and destroyed five houses, a Rural Fire Service (RFS) investigation found.

Defence apologised for starting the fire and appointed former Sydney judge John O’Meally to head a commission of inquiry into it.

On Thursday, the inquiry held its final day of hearings in Sydney.

Counsel assisting the inquiry, Flight Lieutenant Steven Whybrow, submitted that the defence exercise was conducted in line with standard procedures.

But he said that the day in question, October 16, being declared high fire danger precluded the conducting of live fire exercises.

He told the inquiry that that situation was not known to those on the Marrangaroo range.

Major John Lo Shiavo, representing range control officer Major Keith Meloncelli, argued there were differences within standing orders as to when an explosives practice could be carried out.

But Flt Lt Whybrow submitted that overall there was no ambiguity that officers should not act without taking further advice.

During its hearings last year, the inquiry learned that despite RFS recommendations, hazard reduction burns at the training ground had not been carried out for almost two decades.

It also emerged that equipment at the site was inadequate to cope, and exploding ordnance hindered efforts to control the blaze.

A lack of co-operation between Defence and the RFS was also exposed at the hearings.

The inquiry panel will deliver its report to the chief of defence by January 31.