MELBOURNE (BLOOMBERG) - Residents of Melbourne will be allowed to travel freely to other areas of Victoria state as the "ring of steel" surrounding the Australian city of five million is set to be lifted following more than a week without new coronavirus cases.

That comes after one of the world's strictest and longest lockdowns successfully drove down community transmission from a daily peak of around 700 in early August, although with a heavy economic and social toll.

Australia's government estimates that 1,200 jobs have been lost on average a day across Victoria state, while demand for mental health services has surged by more than 30 per cent.

"Today, because of that sacrifice, our state can be whole again," Victoria Premier Daniel Andrews told reporters in Melbourne on Sunday (Nov 8). "If we want to stay open, we have to stay safe."

The new measures come into effect at 11.59pm local time on Sunday. Some restrictions in Victoria remain: people must still work from home when they can, and pubs, restaurants and cafes can only operate with strict distancing protocols that restrict capacity. There are also limits on the size and frequency of visits to households.

The state of disaster will not be renewed on Nov 22 and a further relaxation of the rules is expected to start on Nov 23, Mr Andrews said. The state of emergency has been extended to Dec 6.

Like much of Australia, Victoria curbed the virus amid a nationwide lockdown earlier this year. But infections roared back amid security failings at hotels where returned overseas travellers undertook mandatory quarantine.

An interim report tabled in the state parliament on Friday made 69 recommendations to improve the quarantine system, including the possibility of an extension to home quarantine. The final report will be delivered by Dec 21.

The recommendations for the hotel quarantine model included ensuring a clear line of command to a government department and minister, having police on site at all times, only using hotels that are near hospitals.