Australians have been warned the country is entering a new "dangerous phase" of the pandemic.
Western Australian Premier Mark McGowan said the level of community transmission in Victoria is "something we haven't seen before in this country".
"There is no doubt about it – as a nation we are entering a new and dangerous phase of this pandemic," he said.
It came after Victoria recorded 127 new cases overnight, marking a record spike.
Australia has recorded a total 8397 cases of Covid-19, with 3240 in New South Wales, 2660 in Victoria, 1067 in Queensland, 443 in South Australia, 621 in Western Australia, 228 in Tasmania, 108 in the Australian Capital Territory and 30 in the Northern Territory.
Australia's coronavirus death toll now sits at 106 after two men died in Victoria.
ACT matches NSW's border restrictions
From midnight on Tuesday anyone attempting to enter the ACT from Victoria will be denied entry, unless an exemption has been granted.
Residents returning to the ACT from Victoria will be required to self-quarantine for two weeks.
Worrying change in Australia's virus cases
Authorities have pointed out a concerning change in the recent Covid-19 cases recorded in Australia compared to those that were detected a few weeks ago.
Deputy chief medical officer Michael Kidd said there has been a drastic increase in the number of cases acquired through community transmission.
"Over the past week 509 confirmed cases have been reported in Australia, only 80 of these cases or 16 per cent, were acquired overseas and diagnosed among people in hotel quarantine," he said.
"This is a stark difference to over two weeks ago when 50 per cent of new cases in Australia were acquired overseas and diagnosed among people in quarantine, it shows us how quickly the pandemic can change."
There have been 140 people diagnosed with Covid-19 in the past 24 hours: 127 in Victoria, 10 in NSW and three in WA.
There are now 34 people in hospital across the country, including five in intensive care.
"We are seeing a continuing rise, and the number of people in hospital and intensive care in Victoria, this reinforces the very serious risk that Covid-19 poses, especially on the health of elderly people and people with chronic health conditions," Professor Kidd said.
"We continue to be very concerned about the outbreak in Victoria, and the continuing cases of community transmission.
"The situation in Melbourne has come as a jolt, not just of the people of Melbourne but people right across Australia who may have thought that this was all behind us. It is not. The outbreak in Victoria is a national issue. We are all at risk from a resurgence of Covid-19."