MELBOURNE (BLOOMBERG) - The state at the epicentre of Australia's Covid-19 outbreak announced an easing of restrictions on Sunday (Oct 18), but left many businesses shuttered until next month to ensure community transmission is further curbed.

From midnight, the five million residents of Victoria state capital Melbourne, who have been under lockdown for more than 100 days, will be allowed to travel as far as 25km from their homes and the two-hour time limit on daily exercise will be scrapped, state Premier Daniel Andrews said.

The stay-at-home order will be completely lifted from Nov 1 and the retail and hospitality sectors will largely reopen. That timeframe may be brought forward if case numbers continue to fall.

"These lockdowns have come with pain and damage and hurt, but the strategy is working," Mr Andrews told reporters.

"As other parts of the world are going into a deadly winter, with lockdowns and restrictions that are heartbreaking, (Victoria can now) build a Covid-normal 2021," he said.

The state's response has demonstrated the effectiveness of tight controls, just as the US, UK and many European countries weigh their policy response to a second wave. New cases have plunged from a daily peak of 687 on Aug 4, with infections slowing to a trickle.

But Mr Andrews has come under sustained criticism for imposing the strict lockdown that has risked people's mental health and dragged on the national economy.

Victoria is responsible for about a quarter of gross domestic product and the restrictions have deepened Australia's first recession in almost 30 years.

"The second wave, which led to the lockdown, has taken an extreme toll on the mental health of Victorians and their economic prospects," Treasurer Josh Frydenberg wrote in an opinion piece.

"Now is time for the Victorian government to give Victorians their freedom back and allow businesses to reopen in a Covid-safe way."

The Australian Industry Group, an employer organization representing thousands of businesses, said Victoria's roadmap to recovery was a "maze that has now been turned into a long and winding road."

The Business Council of Australia attacked the delay to reopening retail and hospitality.

"There is no sound reason to continue the restrictions on business, especially with case numbers clearly on a downward trajectory," Chief Executive Officer Jennifer Westacott said.

The state reported two new coronavirus cases on Sunday and no deaths, bringing the 14-day average to eight, with 15 cases from an unknown source. Victoria has been focused on cutting the rolling average and number of mystery cases to below five.

Mr Andrews noted that daily cases in his state and the UK were comparable back in August.

"Today, as Victoria records two new cases, the UK hit 16,171," he said. "And as we continue easing our restrictions, they are being forced to increase theirs."

From midnight across Melbourne, tennis courts, golf courses and skateparks will reopen, hairdressers can resume business and as many as 10 people can take part in outside auctions for residential property - an important boost for the housing market. Up to 10 people from two households can gather outdoors.

From Nov 1, remaining retail and restaurants, cafes, pubs and services such as beauty salons will reopen.

In regional Victoria, where numbers are considerably lower, many of the controls have already been eased and pubs and restaurants will be allowed to have more customers from midnight.

Australia has been at the vanguard of nations seeing success in controlling community transmission.

Its first nationwide lockdown, which lasted roughly from March to May, was one of the most successful in the world, reducing the number of cases to just a handful a day. But security failures at quarantine hotels for returning travellers and poor communication of critical information to migrant communities allowed the virus to roar back in Victoria.

Much of the nation has crushed community transmission, as states such as Queensland, Western Australia and Tasmania restrict entry to people from virus hot spots.

The international border remains closed to non-residents, other than a limited travel bubble with New Zealand, and those returning from overseas must undergo 14 days of quarantine in hotels or other government-run facilities.