The NSW premier says the community "can't live reasonably" with the Delta strain of COVID-19, implying Greater Sydney and surrounds will likely remain in lockdown until the current outbreak is significantly curtailed.
Eligibility for Commonwealth support for those who can't work due to the lockdown, soon to enter its third week, will also be expanded.
NSW recorded 38 new local COVID-19 cases in the 24 hours to 8pm on Wednesday, the highest number of daily infections since the pandemic's first wave.
This included at least 20 people who were in the community for part or all of their infectious period.
Almost 400 people have now caught COVID-19 locally since June 16.
Premier Gladys Berejiklian said her government had until now sought to be "bold and courageous" in the face of outbreaks by keeping NSW open, but the Delta variant had changed the equation.
Until a significant proportion of the population was vaccinated, she said the Delta variant could not be allowed to circulate, likely prolonging lockdown.
Eleven people are in intensive care in NSW, with three ventilated.
Ms Berejiklian said residents of Greater Sydney and surrounds needed to further limit their movement and avoid mingling, and called on eligible residents to urgently seek out vaccination.
About nine per cent of the NSW population is currently fully vaccinated.
"This new variant is a game changer - there isn't anywhere on the planet that has managed to live with this variant, the Delta virus, without having a proportion of the population vaccinated," Ms Berejiklian said.
As a result of the lockdown entering its third week, Prime Minister Scott Morrison said federal government support for locked-down NSW workers would be expanded.
The liquid assets test on COVID-19 disaster payments will from the third week of lockdown arrangements be waived, expanding access to the $500 or $325 payments to also those with $10,000 in available funds.
Mutual obligation requirements for social welfare payments will also be lifted from the third week of lockdown.
"It's a disaster payment - it's demand driven. We'll pay whatever the demand is," Mr Morrison told reporters.
Mr Morrison also said 300,000 additional vaccine doses - half AstraZeneca and half Pfizer - would be expedited for NSW's COVID-hit communities.
Ms Berejiklian said the Commonwealth had acknowledged "the success of our nation depends on the success of NSW (as) we have borne the burden during COVID".
"We are leaving the door open to receiving additional support so I want to stress that the conversations that we have had are ongoing," the premier said.
Meanwhile, teachers and senior students in Greater Sydney and surrounds will be required to wear masks when they return to school next term.
NSW Health also confirmed on Thursday that a fifth aged care worker at SummitCare Baulkham Hills has come down with the virus, but was already isolating. Six residents to date have caught COVID-19.
Ms Berejiklian on Wednesday warned harsher restrictions may be introduced for communities in Sydney's southwest - particularly Liverpool, Fairfield and Canterbury-Bankstown - if COVID-19 continues to spread in the area.
NSW Health issued nearly 20 alerts for venues of concern on Wednesday night, including supermarkets at Casula, Bonnyrigg, Maroubra and Revesby, petrol stations at Condell Park and Pagewood and a pizzeria at Waverley.
Business NSW estimates the lockdown is costing the state $1 billion a week and the NSW government will spend about $1.4 billion on its current small business support package.
AAP understands extended support for businesses and sole traders with an annual turnover of less than $75,000 is currently being considered, as is more targeted assistance to COVID-hit industries.
The federal government earlier rejected NSW's request for the reinstatement of the JobKeeper wage subsidy scheme for the duration of the lockdown.