MELBOURNE (AFP, REUTERS) - A lockdown of Australia's second-biggest city Melbourne will be extended, the authorities announced on Sunday (Aug 29) as the country logged a record 1,323 local Covid-19 cases.

Debate is raging in Australia over whether it should start living with the virus in the community, as the authorities struggle to quash a stubborn coronavirus Delta-variant outbreak.

Almost seven million people in Melbourne and surrounding Victoria state were scheduled to exit a four-week lockdown on Thursday, but state Premier Dan Andrews said it would no longer be possible with case numbers rising by 92 overnight.

The number was Victoria state's highest number in nearly a year.

This is Melbourne's sixth lockdown of the Covid-19 pandemic, and includes a curfew, the closure of playgrounds and strict limits on exercise.

"We still have too many cases in the community for too long for us to be able to open up and give back... those freedoms that we cherish and those freedoms that we desperately want back," Mr Andrews said.

Mr Andrews did not reveal how long stay-at-home orders would remain in place, saying officials would "look at all the different options".

Meanwhile, neighbouring New South Wales (NSW) state, which includes Australia's most populous city of Sydney, posted 1,218 new cases on Sunday - pushing the country's overall daily caseload to a fresh all-time high.

Almost 19,000 cases have been detected in the state of about eight million people since the Delta-variant outbreak began in mid-June.

But with vaccination rates now surging in New South Wales and the authorities predicting 70 per cent of adults there will be fully vaccinated by October, residents weary of prolonged restrictions have been promised some modest freedoms.

In non-hot spot areas, five fully vaccinated adults will be able to gather outside for up to an hour from the middle of next month while the authorities have also signalled small weddings will soon be allowed.

The state has spent some nine weeks under a lockdown, which is scheduled to last until the end of September.

"No matter what the case numbers are doing... double-dose 70 per cent in NSW means freedom for those who are vaccinated," NSW state Premier Gladys Berejiklian said on Sunday, adding that the state has reached the halfway point of achieving the target.

National debate

Australia has fared much better than most developed nations, posting just more than 50,100 Covid-19 related cases and 999 deaths in a population of 25 million.

The country has managed Covid-19 outbreaks differently depending on a state or a territory, causing a heated national debate about the right course of action.

After the national government closed international borders early in the pandemic, its six states and two territories have used various combinations of state border closures, lockdowns and strict social distancing measures to combat Covid-19.

But the national government now insists that the Covid-zero strategy, which had been successful in suppressing earlier outbreaks, is unrealistic after the highly contagious Delta variant reached its shores and is harmful to the economy.

Prime Minister Scott Morrison has been urging states to reopen their borders once a vaccination target of 70 per cent of those 16 and older is reached, but virus-free Queensland and Western Australia states have hinted they may not follow.

Nationally just 33.7 per cent of those eligible have been fully vaccinated, although in recent weeks Australia has been racing to inoculate its population. At current rates, 80 per cent could be vaccinated by mid-November.

"Learning to live with the virus is our only hope," The Age newspaper cited Australia Treasurer Josh Frydenberg as saying on Sunday. "To delay and deny that fact is not only wrong but incredibly unrealistic."

Victoria supports the federal reopening plan, but the state authorities believe the current outbreak, now at 778 active cases, can be suppressed with a strict lockdown, which involves a nightly curfew for Melbourne, Victoria's capital.

The June quarter economic growth figures due to be released on Wednesday may hint whether Australia would enter its second recession in as many years, as the September quarter to be released later in the year is broadly expected to show a contraction, reflecting the current outbreaks and lockdowns.