The leader of New South Wales has warned this is “the worst situation Australia’s been in” since the start of the Covid-19 pandemic.
State Premier Gladys Berejiklian said rules would be tightened in Sydney, the state capital, which is in lockdown.
Covid fines will also go up to AU$5,000 (US$3,685; £2,656) from AU$1,000.
“This is literally a war, and we’ve known we’ve been in a war for some time, but never to this extent,” Ms Berejiklian told reporters.
She added that September and October would be “very difficult”.
Case numbers and deaths in the Australian state remain relatively low compared to some of the world’s worst outbreaks, including in the US and UK.
However, locally transmitted infections hit 466 on Saturday – a significant increase from the previous daily high of 390 set a day earlier.
Four deaths were reported on Saturday, bringing the state’s total number of deaths in this outbreak to 42.
Sydney has been in lockdown for nine weeks. Officials had hoped to lift the city’s restrictions on 28 August, but that is now looking increasingly unlikely.
From Monday, people will be restricted to staying within 5km of their home for shopping, exercise or outdoor recreation, with exemptions in place for social bubbles.
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And from 21 August, anyone wishing to travel from Greater Sydney to regional New South Wales will need a permit. Anyone found travelling without a permit will be fined AU$3,000.
Hundreds more defence personnel will also enforce lockdown measures in the city, after Australian Defence Force soldiers were first deployed last month.
NSW Police Commissioner Mick Fuller said some people had been using excuses related to exercise, social bubbles and regional travel.
“These are some of the strongest powers we’ve ever had in the history of the NSW Police Force,” he told reporters. “It’s all about getting ahead of Delta [variant of Covid-19], not chasing it.”