New South Wales reported 1257 new locally acquired Covid cases and seven deaths.
Large swathes of the state are currently locked down and police are cracking down on compliance measures as authorities battle to contain the spread of the virulent Delta strain.
The seven deaths in the 24 hours to 8pm on Sunday include a woman in her 60s, three people in their 80s and three people in their 90s.
There are currently 1189 Covid-19 patients in NSW hospitals, with 222 in intensive care beds and 94 on ventilators.
"We are seeing a stabilisation in some local government areas of concern and that's positive, we hope that continues," Premier Gladys Berejiklian told reporters.
"However, we have seen also an increase in cases as we mentioned yesterday and the day before in the inner city areas of Glebe and Redfern."
Meanwhile, Victoria has recorded 473 new locally acquired Covid-19 cases, as an independent school that breached restrictions has found itself at the centre of an outbreak.
The health department on Monday confirmed 202 cases were linked to known outbreaks, with the source of the remaining 271 infections under investigation.
It is the highest daily tally of the state's latest outbreak and brings the total number of active cases to 3507.
It comes as authorities investigate a Covid-19 outbreak at the Fitzroy Community School in Fitzroy North, which has repeatedly flouted lockdown restrictions by inviting parents to send their children to class.
Deputy Chief Health Officer Dan O'Brien on Sunday said at least 30 students and staff had contracted the virus.
There are about 60 students enrolled at the school, which describes itself as an "independent, alternative primary school".
Currently, only children of permitted workers and those who are vulnerable are allowed to attend school in Melbourne.
School founder Faye Berryman told ABC News 24 primary-aged children have "a strong resilience to Covid".
"Children's emotional wellbeing, their feeling of insecurity, the unpredictable long-term psychological danger of raising them under a mantle of fear are the price we pay for not having children at school," she said.
More than 3800 children under 12 have contracted coronavirus across Australia between January 1 and September 2.
Of those, 134 have been hospitalised while three have been admitted to intensive care.
Shadow Education Minister David Hodgett said the opposition did not support breaking the rules but he understood the school's actions.
"The government has not put out a single plan. There's no certainty, there's no hope," he told reporters.
The state government is continuing its develop a roadmap out of lockdown, including a plan to return students to classrooms in term four.