SYDNEY - The Australian state of Victoria is further tightening a strict lockdown in Melbourne, revealing plans to completely shut all non-essential shops and drastically scale back activities in major sectors such as construction.

In an announcement that will effectively shutter the economy in Australia's second-largest city, Victoria's Premier, Mr Daniel Andrews, said on Monday (Aug 3) he was forced to impose "radical" measures for the next six weeks but admitted the impact on household incomes would be severe.

"These are heartbreaking decisions but there is simply no choice," he told reporters.

"I know that there will be substantial pain… There is no choice but to do that damage to fix the health problem."

The plans were announced just a day after the state instituted tough new restrictions in Melbourne, including an 8pm to 5am curfew that began on Sunday night and will continue for six weeks.

Mr Andrews revealed that all shops will be forced to close from the end of Wednesday, except for those that provide crucial services such as supermarkets, pharmacies, petrol stations, banks and post offices. Liquor stores have also been deemed crucial.

From the end of Friday, abattoirs and meatworks, which have been the source of Covid-19 clusters, will reduce production by a third and will be subject to strict safety protocols.

Workers will effectively be forced to dress like health workers and will need to wear gloves, gowns and masks, and have their temperatures checked and undergo regular testing.

In the construction sector, which is a major source of employment, large-scale building projects - those involving more than three storeys - will only be allowed to employ 25 per cent of their regular workers. At residential projects, a maximum of five people will be allowed on site.

Mr Andrews urged shoppers not to hoard goods, saying the government is working with stores to ensure a steady supply of regular essential items.

"There is no need for people to be going and literally buying months' worth of groceries," he said.

"You may not be able to buy every single item that you want in the quantities you normally would, but people will have everything they need."

The city of Melbourne, which has a population of five million, woke on Monday morning to an eerie silence after experiencing the new curfew.

People may only leave home for essential purposes such as caring for others or work. Residents in the city are only allowed to leave the house alone and for an hour a day. They cannot travel more than 5km from home and must only go outside for shopping, exercise, work or caring.

Schools will shut from Wednesday. Public transport services are also being restricted.

On Monday, Victoria recorded a further 429 cases of Covid-19, down from 671 on Sunday. Thirteen more people have died, bringing the state's toll to 136.

Since the recent surge in Victoria, other states and territories have also been recording higher numbers of cases but have so far avoided uncontrollable outbreaks. Australia has so far recorded a total of 18,318 cases and 221 deaths.

Victoria's government is providing A$5,000 (S$4,890) grants to businesses such as restaurants, cafes and gyms that have been forced to close. Businesses in Melbourne will effectively be entitled to two grants, totalling A$10,000 each, for the current shutdown.

In addition, Prime Minister Scott Morrison announced on Monday that any workers forced to self-isolate for 14 days will receive a A$1,500 "disaster payment" if they do not have leave entitlements. The Federal Government is also providing various forms of nationwide relief, including wage subsidies for workers at badly affected businesses.

Melbourne's rising case numbers have prompted New Zealand to delay plans for a trans-Tasman "travel bubble" between the two countries. New Zealand has had no community transmissions of the virus for more than 90 days.

New Zealand's Prime Minister Jacinda Ardern said on Monday that Australia would need to be free of community transmissions for 28 days before travel between the neighbours would be permitted.

"Anywhere where we have Covid-free travel they have to be free of community transmission for a period of time - that will be some time for Australia," she told The AM Show.

"It will be on the backburner for several months."

Ms Ardern has signalled travel to individual states in Australia could be permitted earlier, though Australia's Federal Government would need to approve this.

Victoria's Chief Health Officer, Professor Brett Sutton, said on Monday that the strict new measures should result in lower infection rates in the next 10 to 14 days.

Mr Andrews said the measures were the "only way to get these numbers under control". If the measures did not work in six weeks, he said, they could be further tightened.

"We cannot continue to have 400 to 500 cases a day and so many people in hospital, so many people dying," he said.

"These are the tough calls that have to be made, otherwise we are not facing a six-week set of restrictions, we are in for a six-month strategy that I don't think will work."