NSW has recorded 38 new local COVID-19 cases, including 20 people who were in the community for part or all of their infectious period.
Premier Gladys Berejiklian said on Thursday those numbers were "too high".
"We need to get those numbers down."
"I want to say in the most, strongest possible terms, please avoid contact with households with other households, please avoid visiting family and friends."
"The strongest message is do not visit people outside your household in indoor settings," she said.
The 38 new cases recorded in the 24 hours to 8pm on Thursday from nearly 40,000 tests is a jump from the previous day's figure of 27.
NSW Health said 26 cases were linked to a known case or cluster - 13 are household contacts and 13 are close contacts - and the source of infection for 12 cases remained under investigation.
There have been 395 locally acquired cases reported since the latest outbreak began on June 16.
Meanwhile, NSW teachers and senior students in Greater Sydney and surrounds will be required to wear masks when they return to school next term.
NSW Health also confirmed that a fifth aged care worker at SummitCare Baulkham Hills has come down with the virus, but was already isolating. Six residents to date have caught COVID-19.
Masks will be mandatory for all staff in all school settings, as well as students from Year 7 upwards when on-site learning resumes on July 19.
Education Minister Sarah Mitchell said the new COVID-safe rules would apply to schools inside areas impacted by the stay-at-home orders - Greater Sydney, the Blue Mountains, Central Coast, Wollongong and Shellharbour.
In regional areas, masks will be recommended for all staff in all school settings as well as high school students.
On Wednesday, Ms Berejiklian announced pupils in the lockdown areas would start term three learning from home, while regional schools would have strict COVID restrictions.
Meanwhile, harsher localised restrictions could be introduced for communities in Sydney's southwest if COVID-19 continues to spread rapidly in the area.
Lockdown orders governing five million people in Sydney and surrounding regions have been extended for a third week - until at least July 16 - after being initially due to end on Friday.
Ms Berejiklian had warned case numbers could spike due to the highly infectious Delta strain of the virus spreading rapidly in the local government areas of Fairfield, Liverpool and Canterbury-Bankstown.
Fairfield Mayor Frank Carbone said on Thursday he was concerned southwest Sydney was being unfairly targeted, saying "this isn't a Fairfield problem, I won't take anyone pointing finger at Fairfield".
"We have very large families out here. It doesn't take away the responsibility (or) take away the need for (all of) us to be vigilant," he told the Nine Network.
NSW Health issued nearly 20 alerts for venues of concern on Wednesday night including supermarkets at Casula, Bonnyrigg, Maroubra, Revesby, petrol stations at Condell Park and Pagewood and a pizzeria at Waverley.
Business NSW estimates the lockdown is costing the state $1 billion a week and the state government will spend at least $1.4 billion on a small business package to help them survive the crisis.
The federal government has rejected a NSW request for the reinstatement of the JobKeeper wage subsidy scheme for the duration of the lockdown.
NSW Treasurer Dominic Perrottet was reportedly against the extension of the lockdown but on Thursday refused to confirm that.
"My job is to advocate for businesses and keeping people in jobs and that's what I do," Mr Perrottet told 2GB radio.