"We know we're on the cusp of something very very bad if we don't take these steps today," Premier Daniel Andrews said, with cases rising faster than in some waves of the virus overseas.

"There is simply no alternative other than thousands and thousands of cases and potentially more, many many people in hospital and the inevitable tragedy that will come from that."

The lockdown starting at midnight on Wednesday applies to Melbourne and in the Mitchell Shire immediately north of the city, after the state recorded 191 cases in 24 hours, the highest daily number since the pandemic began.

The city border will be patrolled by 260 Defence Force personnel as Mr Andrews warned Melburnians there would be "no escaping to holiday homes ... no fishing trips at Lakes Entrance, no four-hour hikes in the Grampians."

At midnight on Tuesday the border was closed between NSW and Victoria, with NSW Police Minister David Elliott saying there would be "dire consequences" for people who attempt to cross illegally.

In Melbourne, people will only be allowed to leave home for essential shopping, education and work that can't be done at home, medical care and compassionate reasons, and exercise.

The new orders will be in place for six weeks, with restaurants and cafes set to go back to takeaway only, personal and beauty services to close and community sport to be cancelled.

Mr Andrews said testing in nine public housing towers that had been in hard lockdown had been prioritised and accelerated, and when it was completed, the people in those towers would be subject to the same level of stay at home orders as others in Melbourne.

"I wouldn't want anybody in the towers today to be in any doubt. You will be under these restrictions for not one moment longer than you need to be and the best thing to do is to get tested when someone knocks on your door and that does take some time."

Mr Andrews said it was clear the pandemic wasn't over.

"I think a sense of complacency has crept into us as we let our frustrations get the better of us," he told reporters.

"I think that each of us know someone who has not been following the rules as well as they should have. I think each of us know that we've got no choice but to take these very, very difficult steps."

The news was not only alarming in health terms and for Melbourne livelihoods, it greatly complicates Prime Minister Scott Morrison's July 23 budget update, in which he will outline support measures post-September to rebuild the economy as Australia was expected to be emerging from the virus and back to full steam across many industries.

Treasurer and Melburnian Josh Frydenberg, who was in Canberra on Tuesday, was seeking advice on how the bans would impact him.

Mr Andrews said he hoped the worsening Victorian situation would be taken into account as the federal government made decisions about the future of the JobKeeper wage subsidy and JobSeeker unemployment benefit.

"I am confident that the Prime Minister knows and understands that there will be different forms of hardship in different parts of the country, different industry, different sectors," he said.

"I'm confident the Prime Minister knows that and that he and his colleagues are looking to design whatever the next series of decisions that they make, whatever those new or different policy settings are.

The border between NSW and Victoria closed at midnight on Tuesday, with 650 police deployed to the border to enforce the closure.

On Thursday 100 military personnel will arrive to help, with 250 more there by the weekend.

Police and defence personnel are preparing to control 55 separate border crossings.

Mr Elliot said people should not assume the only policing would be at Albury-Wodonga.

"If you want to do the wrong thing, you'll be caught," he said. "I want to make sure everyone knows we're serious when it comes to issuing these fines. They'll be monetary and they could be custodial punishments.

"It's the best thing we can do to ensure those who want to push the envelope know we're serious."

Crossing illegally attracts a fine of $11,000 or six months in prison.

NSW Police Commissioner Mick Fuller said there would be an "enormous amount of resources" at five main border crossings - not only police and defence, but also transport authorities and Parks and Wildlife staff.

Another 29 crossings would be controlled by police and a further 20 "dirt tracks" would be patrolled by fixed wing aircraft and drones.

Mr Fuller said army personnel would be on the ground but were unlikely to have a role checking travel exemptions, "unless we were absolutely stretched".

"They don't have the powers to demand," he said.

Mr Fuller said NSW residents currently in Victoria would have to apply for an exemption and self-isolate at home for 14 days when they returned to NSW.

Victorians living in border towns would also have to apply for an exemption, but authorities would make it easier for them to cross, he said, without giving details.

"If you're within the two border towns I want people to be confident we're going to make it as easy as possible to cross," he said, but also suggested police would accommodate urgent situations such as a child needing hospital.

Border communities were being defined by specific postcodes, with nine listed on one side of the border and 11 on the other.

Victorians not from border towns would not be allowed across other than for an emergency, for which they would have to apply for an exemption.

Trucks and other large haulage would be "green-lighted" but would be stopped and sampled.

People would be able to apply for exemptions from Tuesday evening, he said.

The border closure was likely to last "weeks, rather than days", Mr Elliot said.

"I think you can probably assume with the effort put into a deployment like this, a couple of weeks," he said.

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Mr Fuller asked people to avoid the borders altogether for 72 hours if possible because of expected congestion.

People would not be stopped travelling into Victoria from NSW, but were being asked not to travel, and once they tried to return, they would face 14 days isolation.

Anyone who had booked a flight to travel after midnight from Victoria into NSW would not be allowed to board without an exemption.

As bus and train services were suspended to Victoria, Albury mayor Kevin Mack said he supported the border closure, but with 60,000 movements a day across the border, including people accessing the cancer centre and hospitals in Albury, it was complex.

"There's a whole issue that's developing here," he said.

Mr Elliot said the next 72 hours would be challenging.

"People will be confused, communities will be upset, local businesses will be interrupted. But what we'll always do as a government is to minimise the burden," he said.

In Melbourne, all of the new cases were in the community, with none detected among returned travellers in quarantine. Victorian authorities said 37 cases were linked to known clusters, with the source of 154 still being investigated. The state now has 772 active cases.

Another 13 cases were diagnosed in the nine public housing apartment blocks, which now have 69 confirmed cases. The Al-Taqwa College outbreak also grew, with 12 new cases bringing the total to 90.

Eight staff at the Northern Hospital in Epping have been diagnosed with coronavirus, and a new case has been confirmed at the Assisi Aged Care home in Rosanna where authorities were beginning widespread testing of staff and residents.

Health Minister Greg Hunt described the Victorian outbreak as "very serious".

"I don't think that anybody can rule out that if the disease continues to spread, there could be further restrictions," he said. "I think it's very important to be open and honest about that."

In NSW eight new cases have been reported, seven in hotel quarantine, but one in a returned traveller who had tested negative on his 10th day in quarantine, then returned home to Newcastle after his quarantine period before developing symptoms on Sunday.