Chief Health Officer Brett Sutton said Victorian authorities are closely monitoring wastewater samples from the border region.
"We're on high alert interstate and also here in Victoria," he said.
Mr Sutton said the extreme risk designation was part of a broader effort to keep COVID out of Victoria.
"It's very tough for people who are normally a resident in Victoria to be stuck outside the state, of course there are those exception and exemption processes that are in place...," he said.
"It's very strict in terms of the movement of people across the border being minimised as much as we can."
Victoria has added a new category to its interstate travel permit system, designating all of NSW a COVID-19 "extreme risk zone", as the southern state recorded 12 new locally acquired coronavirus cases.
Chief Health Officer Brett Sutton made the "extreme risk zone" declaration late on Friday, effective from 11.59pm.
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"If people enter Victoria from an extreme risk zone without an exemption, they will be put on a return flight or placed in 14 days mandatory hotel quarantine. Exemptions will only be granted in exceptional circumstances," the state health department said.
Victorians who have been in NSW in the past 14 days and are wishing to return home can only do so with an exemption or other valid permit, such as a Specified Worker Permit.
To find out if your work is deemed essential click here.
They said the following: "While Victoria is in lockdown, cross-border community residents (who live outside of Victoria) can enter Victoria, for one of the five following reasons:
- shopping for necessary goods and services
- care and caregiving, including medical care and getting a COVID-19 test
- authorised work and permitted study
- to get a COVID-19 vaccination
"Cross-border community residents are subject to a 5km limit into Victoria that applies for exercise or obtaining necessary goods and services. For example, if you live 2km away from the border, you are able to travel 3km into Victoria. The 5km limit does not apply to obtain goods or services for health or medical purposes, or if the 5km limit would make it impractical to get necessary goods and services."
Red zone designations still apply to the ACT, South Australia and Norfolk Island.
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The order follows Premier Daniel Andrews' unsuccessful pitch at national cabinet on Friday to put a "ring of steel" around Sydney.
The concept, involving a police guard around the city to stop anyone leaving, was used during Melbourne's lengthy second lockdown in 2020, in order to protect regional areas and other states from infection.
However after the national cabinet meeting Prime Minister Scott Morrison argued such a strategy was unnecessary because stay-at-home rules were enough to rein in the virus.
Victoria recorded 12 new locally acquired COVID-19 infections on Saturday, 10 of which were in quarantine throughout their entire infectious period. All infections are linked to current outbreaks.
The figures continue the state's encouraging downward trend in new diagnoses - having recorded 14 cases on Friday and 26 on Thursday.
The numbers come with 19,281 vaccine doses administered in the past 24 hours in Victoria and 39,846 COVID tests conducted.
Victoria's current set of restrictions - its fifth lockdown - are scheduled to be eased on July 27 but Mr Andrews says health authorities want more data before making a decision.
Meanwhile, police are preparing to deal with an anti-lockdown protest planned for Melbourne on Saturday and are concerned it could thwart the state's efforts to emerge from restrictions.
A rally involving a few hundred people could involve flares and the blocking of an inner-city bridge, Chief Commissioner of Police Shane Patton said on Friday.
"Where you have the vast majority of Victorians doing the right thing, sitting at home, it's such a sense of entitlement to say 'I can go out and protest just because I disagree' and potentially breach all of the CHO guidelines and spread the virus," he told 3AW.
Mr Andrews labelled the idea of protesting lockdown "ridiculous".
"Protest against this virus by staying at home, following the rules and getting out of lockdown," he said.
Australian Associated Press