The national cabinet has given the green light for small restaurants and venues to fit more people in, allowing them to have one person for every two square metres instead of every four square metres.
Prime Minister Scott Morrison revealed the Australian Health Protection Principal Committee has revised its advice to allow states and territories to relax social distancing measures further than planned for smaller venues.
Venues which are smaller than 100 square metres would be allowed to have one person per two square metres under the new guidelines.
"For much smaller premises that would have otherwise been trying to stick to a four-square-metre rule arrangement, this just gives them a bit more room for them to be taking more patrons," Mr Morrison said.
However will be up to each state and territory when they move to a two-square-metre rule.
Western Australia and Tasmania have already reduced social distancing requirements to one person per two square metres.
Chief Minister Andrew Barr said the territory government would consider the advice from health officials over coming days.
The government will consider whether there should be a blanket patron limit for smaller venues or whether a formula-based rule would apply, Mr Barr said.
The ACT has been criticised for its "heavy-handed" response in monitoring the four-square-metre rule in licensed venues last week.
Australian Hotels Association ACT general manager Anthony Brierley said police and government officials came into restaurants and licensed venues with tape measures during the busy periods of trade to enforce the one person per four square metres rule.
However ACT Health Minister Rachel Stephen-Smith said no businesses had been fined, and fewer than 10 warnings had been issued.
She said most businesses were doing the right thing, and authorities would be out in force again this weekend.
Mr Morrison also said the expert medical panel would start formulating a road map for entertainment venues to re-open.
It comes after the federal government announced a $250 million stimulus package for the arts industry on Thursday.
He said major productions and event planners needed "certainty" from state and territory leaders about when restrictions would ease in order for the package to work.
Mr Morrison also said there was an "appetite" for events like major festivals to resume.
"This is one of the reasons why we've asked the medical expert panel to look at what a road map might be for the entertainment sector so they can actually make some decisions about what is possible," Mr Morrison said.
"As time goes on, states and territories and operators are finding more innovative ways to respect social distancing and conduct their business.
"I would hope that it would not be beyond their imagination to be able to overcome those issues [of social distancing]."
The national cabinet also decided that international arrivals will be subjected to compulsory coronavirus testing on arrival and again before they are allowed to leave their quarantine hotel.
In Victoria, authorities say about 30 per cent of people in quarantine have refused testing, but Chief Health Officer Brendan Murphy said he expected people had to comply as a condition of leaving the hotel.
"We will make sure people understand before they come that this is a requirement. I think most people will cooperate with that arrangement," he said.
There would be no change to the 14-day quarantine period, for now, cabinet decided.
Professor Murphy has also signalled Australia's borders would likely remain closed until a vaccine for coronavirus is found.
Qantas chief executive Alan Joyce said on Thursday he believed the airlines international flights were unlikely to resume "in any real size" until July next year.
However Mr Morrison said he hoped to see a travel bubble with New Zealand happen sooner than that.
Mr Morrison also indicated plans to extend the ability to change industrial agreements beyond September.
The flexibility includes the right for employers to reduce people's hours during the coronavirus.
It was introduced as part of the JobKeeper wage subsidy package.
It had a sunset clause to the end of September, when the JobKeeper scheme is also expected to end, but Mr Morrison now wants that flexibility extended.
If the flexibility was withdrawn, part-time hours would be most at risk, impacting jobs for women and long-term casuals, he said.
"In order to fulfil the requirement of the full-time hours, at the full rates, then I fear that that could lead to part-time employment being lost unnecessarily," he said.
"It's important in talking about ongoing fiscal support we also talk about ongoing industrial relations flexibility. Industrial relations inflexibility in this environment will cost jobs."
He did not say how long he would seek to keep the flexible system in place.
However Mr Morrison indicated earlier on Friday the government was developing more targeted assisted packages for when the JobKeeper scheme ended in September, including for the aviation sector.
"There'll be a next step beyond that and we're in the process of designing that now," Mr Morrison told 2GB.
Mr Morrison played down the significance of the coronavirus resurgence in Victoria, saying the message from the outbreaks was one of optimism, showing Australia was ready to respond.
"We can deal with this and we will continue to deal with this," he said.
Mr Morrison stressed it was a localised outbreak, restricted to "a part of the suburbs of Melbourne".
Professor Murphy was also upbeat about the Melbourne resurgence, saying it had been expected and planned for.
"The mini outbreak we've seen in Victoria is what we predicted, what we planned for," Professor Murphy said.
"We are very likely to see more such outbreaks," Professor Murphy said. "We're prepared, we're responding and we are very, very comfortable with the way things are going."
Victoria was tracing more than 1000 contacts of cases and testing "extraordinary numbers", he said.
Professor Murphy made his final appearance as chief health officer, now taking up a job as Health Department secretary.
Former ACT chief health officer Professor Paul Kelly will begin as acting chief medical officer on Monday.