Prime Minister Scott Morrison has declared "we're all Melburnians now when it comes to the challenges we face, we're all Victorians now" as the state recorded another 134 cases of coronavirus overnight.
Premier Daniel Andrews said 123 of the new cases were under investigation, and six of the cases were linked to clusters in public housing towers that have been subject to harsh lockdown measures.
A testing blitz across Victoria is continuing. Mr Andrews said the state had now conducted more than a million tests, including almost 30,000 tests on Tuesday.
All of metropolitan Melbourne and the Mitchell shire area on the city's north will go back into lockdown on Wednesday night, with residents only allowed to leave for four reasons.
Areas of regional Victoria outside of the city won't be going into lockdown, and Victoria Police is preparing to monitor main arterial roads out of the city in a "booze bus style" operation, stopping some cars as they try to leave the city.
While not downplaying the serious situation in Victoria, Mr Morrison said the outbreak in that state was not unlike those seen in other countries as economies reopened.
"The [outbreak] in Melbourne is particularly serious, but on an international scale, it is well within the band and so it is not surprising and that's why we need to continue to apply or focus on our effort and work together as we did in March and in April and in May and in June and so we will do it in July, August, September, October, November, December, and into next year if necessary."
The stay at home measures covering Melbourne and Mitchell shire are in place for six weeks, but measures taken by other states blocking Victorians from entering could be in place for longer.
The border closure between NSW and Victoria started at midnight, with kilometres of cars backed up on the Hume Highway at Albury-Wodonga, the busiest crossing of the Murray River.
NSW residents living in towns near the Victorian border have been warned not to travel to other parts of the state, with the premier flagging further action may be needed to isolate those communities.
Premier Gladys Berejiklian on Wednesday said more than 50,000 exemption permits were issued overnight for people living in NSW-Victoria border communities, allowing them to cross between the two.
But the premier warned the widespread community transmission of COVID-19 in Victoria is a huge risk for NSW and urged residents in Albury and other border towns not to travel to other parts of the state.
"The probability of contagion in NSW given what's happened in Victoria is extremely high," Ms Berejiklian told reporters in Sydney.
"I am extremely concerned about what is happening in Victoria, the extent of community contagion is unlike anything we have seen in Australia."
She said her government would consider either establishing a border north of Albury or making exemption permits more difficult to obtain.
The Berejiklian government is also looking into making hotel quarantine mandatory for NSW residents returning from the southern state.
Currently, NSW residents returning from Victoria must self-isolate at home for 14 days but Ms Berejiklian said forced hotel quarantine - which residents will have to pay for - has not been ruled out.
Mr Morrison said people in border towns close to Victoria shouldn't be moving more widely around NSW.
"We're not seeking to see people move from there up to Sydney or places like that," he said.
"I think for the time being, it's wise and good common sense that if you live in and around those border towns, you stay close to those towns at present and not go off to family events or other things more broadly across the state."
Northern Territory Chief Minister Michael Gunner announced on Wednesday Victorians wouldn't be allowed into the territory, and that he had concerns about people from NSW.
"Melbourne is out of control. That makes it harder for the rest of Victoria to stay in control," Mr Gunner said.
"That is not a risk that we, in the territory, are prepared to take. So to the rest of Victoria - I am sorry, you haven't done anything wrong but it is my job to put the territory first."
The extended lockdown in Melbourne and border closures have also increased the pressure on the federal government to extend financial support beyond the September cut off dates for the JobKeeper wage subsidy scheme and the JobSeeker supplement payment.
"Both the Prime Minister and I have talked about extending income support to those who need it with each new phase and obviously we will announce the details of then on 23 July," Treasurer Josh Frydenberg said on 2GB on Wednesday morning.
"We do recognise that some sectors of the economy are doing it tougher than others, and in the case of Victoria, obviously they are going through a challenging period."
Mr Frydenberg said Melbourne's lockdown period was currently scheduled to end at the end of August and JobKeeper and JobSeeker were legislated to the end of September.
- With AAP