Victoria has the second largest increase in new COVID-19 cases with 374 new infections as Melbourne is overwhelmed by a second wave of fatal respiratory disease.
The total on Tuesday is far higher than on Monday  and is in second place after the 428 cases confirmed on July 17.
Prime Minister Daniel Andrews also confirmed that three other people in the state died of COVID-19 overnight – increasing the death toll to 126.
Mr. Andrews said a woman in her eighties, a woman in her nineties, and a woman over 100 all lost their lives.
The increase in cases is based on data released on Monday, which shows that the number of active cases in Melbourne has decreased in most areas of local government, with the exception of two danger zones, where the number of cases has risen sharply.
Brimbank, west of the CBD, saw 19 new cases totaling 271 cases on Monday, while Wyndham in the city's southwest suffered 10 more cases to reach 350.
The surge on Tuesday comes just a day before masks become mandatory in Victoria, with a $ 200 fine if they are not worn after 11:59 p.m. on Wednesday evening.
Pedestrians with face masks walk through the city on Monday. Victoria has seen its second largest surge in new COVID-19 cases
A woman with a face mask walks through Melbourne on Monday. The total on Tuesday is far higher than on Monday  and is in second place after the 428 cases confirmed on July 17
New South Wales has now registered 13 new COVID-19 cases – ten related to an outbreak at the Thai Rock Restaurant on Stockland Mall in Wetherill Park in western Sydney.
Another two new cases have been linked to the Crossroads Hotel Cluster in Casula, which is now linked to 50 cases.
Prime Minister Gladys Berejiklian insisted that she would not be ahead of health advice by requiring masks to be worn in public amid the growing COVID-19 fall burden.
Ms. Berejiklian refused to follow Victoria's leadership in enforcing mask use in public and urged people to wear masks where social distance was impossible.
She said social distancing continues to be more important, while NSW Health on Tuesday encouraged residents to avoid unnecessary trips.
"What worries NSW Health and me the most right now is what people do when they enter restaurants … they can't wear a mask while eating," Ms. Berejiklian told 2 GB Radio.
“There is currently the greatest risk at indoor events.
"The previous Health Council has served NSW very well, and it is not up to politicians to come up with this stuff over time."
Victorian Prime Minister Daniel Andrews enters Monday's press conference with a face mask. He will confirm the official figures for the past 24 hours at a press conference on Tuesday morning
Sources have told the Sydney Morning Herald that sectoral closures, such as pub and restaurant closures, are more likely than full closures if NSW infections continue to increase.
"There could be blockages of sectors, particularly pubs and restaurants," said a minister.
Another minister said there was "no appetite for a total ban," but felt that some restrictions had to be changed.
"I think there is a feeling that some things have gone too fast and too far and that we need to tighten some areas again," said the minister.
"I think given the careful nature of Gladys, [Deputy Prime Minister John] Barilaro and [Treasurer Dominic] Perrottet probably pushed her to open things more than she felt comfortable."
The New South Wales Labor Party has asked all residents to wear masks on public transport.
Pictured: A pedestrian with a face mask is walking in Melbourne on Monday while the city is preparing to wear a mask from Wednesday evening
Brimbank, west of the CBD, saw 19 new cases on Monday, affecting a total of 271, while Wyndham, southwest of the city, suffered 10 more cases to reach 350
Victoria reported on Monday about 275 infections and the death of a geriatric nurse in the eighties
A couple wearing face masks in Melbourne this week. The subject of protection is mandatory in the state on Wednesday from 11:59 p.m.
Ms. Berejiklian said she was concerned that NSW was at a "critical point" in the pandemic.
She said the state had a chance to be one step ahead of the virus and control its spread if residents restricted their activities and practiced social distancing over the next few weeks. "If you can't guarantee social distance wherever you go … you have to wear a mask," she told reporters in Sydney.
An investigation into the botched hotel quarantine system in Victoria, which opened on Monday, discovered that every single new case of coronavirus within the state could be linked to the deficit program in recent weeks.
The state government initiated the investigation, headed by retired judge Jennifer Coate, after new COVID-19 cases were linked to security infection control violations in quarantine hotels in late May and early June.
Monday's Senior Assisting Counsel Tony Neal QC suggested that mandatory isolation failure could be far more widespread than originally thought.
"Comments from the chief health officer to the media suggest that any case of COVID-19 in Victoria in the past few weeks could possibly be included in the hotel quarantine program," he said.
Pictured: Medical staff at a COVID-19 popup site in Casula in southwest Sydney
A formal investigation is being conducted into the possibility that the state's second fatal outbreak of COVID-19 is due to mistakes made in the accommodation of returning travelers. Pictured: An employee in a quarantine hotel