Despite nearly two months of a hard lockdown, Melbourne's COVID-19 cases surged to record levels on Thursday.
Officials are blaming the spike on illegal home gatherings organised to watch a key sporting event.
The state of Victoria, where Melbourne is located, recorded 1,438 new infections on Thursday.
That's a 50% rise on Wednesday's numbers.
Authorities say a third of the new cases can be traced back to weekend viewing parties for the Australian Rules Football Grand Final.
Victoria's COVID-19 Response Commander Jeroen Weimar admitted it was a blow against efforts to fight the virus.
"We have a far greater scattering into new suburbs, new communities, new households, that haven't been touched by coronavirus before in this or any of our other recent outbreaks. So we know that everyone's fatigued, we know everyone's tired of this, but today is a significant setback in how we manage this outbreak."
Melbourne along with Sydney are Australia's largest cities, and they have been under lockdown for weeks.
Authorities have since ditched a COVID-zero strategy and are now focusing on vaccines as a way out of the tight measures.
Once 70 to 80 percent of adults are fully vaccinated, Victoria and New South Wales plan to start lifting restrictions.
Prime Minister Scott Morrison is urging other states and territories to follow suit and to begin living with the virus.
The federal government plans to phase out its emergency support for businesses and employees as vaccination rates increase.