Prime Minister Scott Morrison says the changes reflect the fact that Australia "has come through this pandemic strongly".
"I welcome the fact that in NSW and Victoria they are getting back to normal - hallelujah," he said on Wednesday.
"We have been waiting a long time for these sorts of things and the rest of the states I'm sure will continue down that path."
Victoria's Health Minister Martin Foley says a raft of restrictions will ease from 11.59pm on Friday, after the state passed the peak of its second Omicron wave.
"That's why we're in the position of being able to take some important steps over the coming days," he told reporters.
Close contacts of confirmed cases will no longer have to quarantine provided they wear a mask indoors and avoid sensitive settings. They must also return five negative rapid antigen tests over the seven-day period.
NSW Premier Dominic Perrottet says the requirement for close contacts of COVID cases to isolate for seven days will end at 6pm on Friday.
Close contacts will have to undertake daily rapid antigen tests, wear masks indoors and work from home where possible.
They will also have to notify their employers and avoid high-risk environments like hospitals and aged care settings.
NSW will move towards removing hotel quarantine and ditch the green dots indicating where to sit on public transport.
Although it was not the end of the pandemic, "it is a great day for our state", the premier said.
"It is also a day to reflect on what we have come through ... let's just focus on success for a moment," he said.
Business leaders have been calling for the end to the seven-day isolation rule, saying it will ease staff shortages for businesses trying to recover from the pandemic.
Clinical epidemiologist and head of the Melbourne School of Population and Global Health, Nancy Baxter says a quarter-to-half of people who have a household contact with COVID-19, will likely contract the virus.
"We need to protect people from those households contacts if we're allowing them to leave home without isolation," she told ABC TV on Wednesday.
"You'd want them to do RATs, you'd want them in masks and not just in any mask, in a high-quality mask like a P2 or N95."
Employers should be required to keep those people isolated or physically distanced from other workers "because there's going to be a high-risk of getting it into the workplace for these people", she said.
"It is (politically) expedient for all of these things to be relaxed because it signals that COVID is over.
"The problem is COVID hasn't gotten the memo .... and what we're seeing in Australia right now is ... one of the world's highest rate of new cases of COVID per day."
LATEST 24-HOUR COVID-19 DATA FROM ACROSS AUSTRALIA:
NSW: 15,414 cases, 15 deaths, 1639 in hospital, 72 in ICU
Victoria: 10,628 cases, 14 deaths, 437 in hospital, 34 in ICU
Queensland: 8995 cases, six deaths, 594 in hospital, 25 in ICU
Tasmania: 1819 cases, 56 in hospital, two in ICU
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