Sydney was battling a fresh Covid-19 cluster just as Melbourne's latest outbreak receded, highlighting Australia's difficulty in quashing persistent small virus flare-ups.

Ten people were diagnosed with Covid-19 in Sydney overnight, taking the cluster that first emerged in the city's Bondi Beach area last week to 21 cases, according to AFP.

New South Wales state Premier Gladys Berejiklian said health officials expected the outbreak in Australia's most populous city to continue growing in the coming days, after several people were infected in just “fleeting” non-physical contact with a case in a cafe and a large shopping centre.

In response, the government has reimposed mandatory mask-wearing in public transport and retail outlets across much of greater Sydney, but it has stopped short of ordering a lockdown.