The indefinite postponement is another blow to Canberrans hoping for a return to normality. The government also scrapped the New Year's Eve fireworks and Australia Day celebrations to avoid large gatherings at the start of the year.

Enlighten, the Canberra Balloon Spectacular and Canberra Day will go ahead, but will adapted to comply with health regulations.

The government explored an option to proceed with the event at different venues around the capital, but Multicultural Affairs Minister Tara Cheyne said it would have ruined the event's spirit.

"I think the National Multicultural Festival has a really firm and special place in people's hearts in Canberra," she said.

"It is about people coming together, and if we were to have a number of different smaller events that spirit of the National Multicultural Festival is lost.

"I think its actually quite clear in the name, National Multicultural Festival - one festival, multiple cultures all together in the one place."

Canberra Dragon Dance and Yut Hung Kung Fu founder Dr Wilson Lo said he accepted the need for the festival to be postponed.

"We normally have a big street performance on the Saturday with the martial artists, and at least one large nine-person dragon and multiple lions - up to 10 lions at once," Dr Lo said.

"We hope we can still do it later in the year.

Dr Lo is hopeful the group will be able to perform at smaller Lunar New Year events next year.

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Polish children's dance group Wielkopolska has been involved in the festival since 1981, and usually performs during Floriade.

The group's artistic director Mark Mikolajczak has strong memories of dancing at the festival as a child. He now has two children involved in traditional Polish dancing.

"It's one of those big events that our kids will look forward to performing in - it showcases our beautiful costumes and the dances that we do," Mr Mikolajczak said.

Yet, like Dr Lo, Mr Mikolajczak accepts the event's postponement was necessary.

"The festival itself attracts people from all over Australia, so it pretty much opens up all the borders. Even internationally, people fly in for it," he said.

"People are in very close containment and sharing food, eating with their hands ... that is risky."