More people will soon be allowed in NSW venues and wearing masks will be optional in most situations from Friday.
Premier Gladys Berejiklian said the state will revert to the two-square-metre rule for indoor and outdoor events and masks won't be mandatory except on public transport, in taxis and Ubers.
"Hospitality workers, people attending places of worship, won't need to mandatorily wear a mask, but we do ... strongly recommend that especially in an indoor setting.
"Where you can't guarantee social distancing, you should be wearing a mask, especially if you are a vulnerable person," the premier said on Wednesday.
"We want to continue to give the community and businesses the confidence to move forward, especially with the expansion of the two-square-metre rule which will allow most venues to double their capacity," Ms Berejiklian said.
Gyms will maintain the four-square-metre rule, while caps on weddings and funerals remain at 300.
Only 20 guests will be allowed to dance at weddings and singing in public remains capped to five people.
"We want to mitigate against super-spreading events, so please appreciate and respect why we continue to say no dancing, no singing, no mingling," Ms Berejiklian said.
NSW will also increase its weekly cap on international arrivals to 3000 because "it's the right thing to do" and the system could handle it.
"While we have increasing numbers of people coming from Monday through Sydney airport and while we do have the more contagious strains of the virus becoming more prominent ... it's really important for us to stay vigilant," she urged.
NSW had already processed more than 122,000 Australians returning from overseas, with 45 per cent of them form other states, she said.
She was speaking after NSW notched up 24 consecutive days with no local transmission of the virus.
NSW Chief Health Officer Kerry Chant said fears had eased about the returned traveller who had inexplicably tested positive on the weekend, two days after completing the required 14 days of hotel quarantine in Sydney.
The case triggered health alerts primarily in the Illawarra region after the person attended multiple venues there.
Dr Chant said transmission in hotel quarantine "was very unlikely" after genomic testing indicated the case was not related to any other cases in the hotel at the same time.
Further investigations were necessary to determine the source of the case, including the possibility it's an old infection from overseas.
The person had remained asymptomatic and was "pretty non-infectious" when they were out in the community, Dr Chant said.
Meanwhile, NSW Health expanded its warning for people who were at the Holiday Inn at Melbourne Airport between January 27 and February 9 after two more cases were linked to the quarantine hotel which has since been closed.
"We are concerned by what's occurring in Victoria," Ms Berejiklian said.
Passengers arriving on flights or train from Victoria are being screened.
NSW recorded no new locally-acquired cases of COVID-19 in the 24 hours to 8pm on Tuesday with four new cases detected in returned travellers from 18,885 tests.
Australian Associated Press
