SYDNEY - New South Wales imposed tight restrictions to curb a fast-growing Covid-19 outbreak in Sydney, as other states and New Zealand closed their borders to arrivals from Australia's most populous state.

As the city's "Bondi cluster" increased by 16 cases to 31 on Wednesday (June 23), the New South Wales government restricted travel for residents of specified zones in Sydney, limited household gatherings to five guests only, and made mask wearing mandatory inside shops and offices and at outdoor events.

The Premier, Ms Gladys Berejiklian, warned that she could not rule out imposing a full-scale lockdown.

"The New South Wales government will not hesitate to go further and harder if we have to," she told Parliament on Wednesday.

"I really want the public to be prepared. We've not experienced this level of transmissibility in this variant previously."

The authorities are concerned because the outbreak involves the highly contagious Delta variant and has resulted in infections caused by apparently fleeting cases of physical contact.

The main superspreader event was a birthday party held in Sydney on Monday that was attended by 30 people, 10 of whom have tested positive, including a two-year-old. At least one other case is believed to have been transmitted when two people passed each other in a department store.

The new restrictions, which will last for a week from 4pm on Wednesday, include a 50 per cent capacity at outdoor seated events and a ban on dancing at indoor venues except for weddings, where a 20-person limit applies. The rules apply to Sydney, the nation's largest city, as well as the surrounding region, including the city of Wollongong.

Australian states were quick to impose border restrictions. Some, such as Victoria and Queensland, barred arrivals from designated zones in and around Sydney. Others, such as Western Australia and South Australia, shut their borders to all arrivals from New South Wales (NSW).

New Zealand currently has a quarantine-free travel bubble with Australia, but imposed a 72-hour ban on travel to and from NSW from midnight on Tuesday. The move came as it emerged that an infected Sydney resident travelled to and stayed in Wellington, New Zealand's capital, from Friday to Monday.

Wellington imposed additional restrictions until Sunday night as a precaution.

Australia has largely avoided large-scale lockdowns since an initial one in March last year, relying instead on a mix of targeted restrictions, limited lockdowns, mass testing and swift contact tracing.

However, Melbourne, the capital of Victoria, has instituted several lockdowns after a series of quarantine breaches.

The Sydney outbreak comes on the heels of a recent cluster in Melbourne that led to a strict citywide lockdown. Victoria has recorded three local cases in the past week.

In contrast to the effective Australian public health response, the country's vaccination roll-out has been slow, partly due to supply problems and the federal government's initial view that a lack of local cases made a speedy roll-out unnecessary.

Just 2.8 per cent of the nation's 25.7 million residents are fully vaccinated, and 24 per cent have received a first dose.

The federal government also announced on Wednesday that it would replace the controversial AstraZeneca vaccine, which now dominates its vaccine programme, by October, when supplies of vaccines by Pfizer and Moderna become more widely available.

The current Sydney outbreak began when a driver for an overseas airline crew became infected and travelled across the city, including to the busy Westfield shopping centre near Bondi Beach. The centre has turned into a ghost town, with retailers reporting sales drops of more than 70 per cent.

The NSW Health Minister, Mr Brad Hazzard, urged the public to wear masks and follow the new health rules, warning that the Delta strain was spreading dangerously quickly.

"We have gone from near and present danger to a very real and present danger, not just in a shopping centre but right across Sydney," he told reporters.

Some public health experts urged the NSW government to impose a stricter lockdown.

"It looks like it's a major outbreak just about to start," Professor Adrian Esterman, from the University of South Australia, told ABC News. "I would be very worried.

"It is starting to get to the stage where it is going to be difficult for the New South Wales contact tracing team to manage."