NSW recorded 44 locally-acquired COVID-19 cases in the 24 hours to 8pm yesterday.
The source of nine of the cases remains under investigation.
Twenty-nine of the new cases were either fully or partially in the community while infectious.
This afternoon, NSW Premier Gladys Berejiklian again stressed the importance of strict lockdown measures to avoid deaths.
"This is the opposite of where we need or want the numbers to trend," she said.
"Do not think that the NSW Government thinks we can live with this when our rate of vaccination is only at 9 per cent."
Berejiklian said several new social distancing restrictions will be introduced to combat the state's Covid-19 outbreak.
People will be able to exercise only in groups of two (or with their households). People may not exercise more than 10km from their homes. From Sunday, the number of mourners at funerals will be capped at 10.
Chief health officer Kerry Chant said the outbreak is now at its "challenging" point.
"I know that this has been a long journey in the fight against Covid but we cannot stumble over this hurdle," she said.
"This is an incredibly challenging time and I want to stress I am incredibly concerned. I need all members of the community to follow the public health advice."
Meanwhile, Queensland has recorded no new locally-acquired cases in the past 24 hours, Premier Annastacia Palaszczuk announced this afternoon.
There were also no new cases in hotel quarantine.
"To all those boys and girls out there, that's a donut day, and we're absolutely delighted," she said.
Despite the good result, Palaszczuk said restrictions, including masks, would continue for another week.
There are 45 active cases of Covid-19 after 15,543 tests were conducted in the past 24 hours.
Chief Health Officer Jeannette Young said there were 8,679 people in home quarantine.
"We are not totally out of it yet," she said. "We must keep up quarantine and testing."
No decision on NSW border closure
Palaszczuk warned that the New South Wales outbreak had the potential to take over the country.
She said she would be looking very closely at what happens over the border.
"The eyes of Australia really are on Sydney with the epicentre of the Delta strain at the moment, because our biggest concern is if that's not contained and brought under control, it will spread right through the country," Palaszczuk said.
She said National Cabinet would get a briefing on the situation later today, but she wouldn't be drawn on what action Queensland might take.
"I don't want to speculate, so I just want to make sure that we are monitoring it over the next week and to see what actions the New South Wales government take," she said.