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 Australia's prime minister apologised for a sluggish COVID-19 vaccination programme on Thursday, while the country's most populous state reported its biggest one-day spike in infections in 16 months and warned cases would likely rise further.

Australia was widely lauded for containing the pandemic in 2020, but it has struggled this year to slow the spread of the highly contagious Delta variant even with more than half its 25 million population under a weeks-long lockdown.

The curbs, which Treasurer Josh Frydenberg said was costing the economy about A$300 million ($220 million) daily, and the likelihood that they will stay in place with less than 15% of the adult population fully vaccinated have stoked public anger.

"I'm sorry that we haven't been able to achieve the marks that we had hoped for at the beginning of this year," Prime Minister Scott Morrison told reporters in Canberra.

Australia has been administering less than 150,000 vaccines each day, well behind other developed nations.

The government says it will meet its target to inoculate its adult population by end-2021 as millions of vaccine doses arrive from Pfizer (PFE.N) and Moderna (MRNA.O) in the coming weeks.

Earlier in the day, New South Wales (NSW), Australia's most populous state, reported 124 new COVID-19 cases, versus 110 a day ago, the highest in 16 months.

Most of the infections were reported in NSW capital Sydney, which is in its fourth week of lockdown.

Victoria state, entering a second week of stay-at-home orders, logged 26 new cases, up from 22.

"We anticipate case numbers will continue to go up before they start coming down and we need to brace ourselves for that," said Gladys Berejiklian, premier of NSW.

'VACCINE IS KEY'

The biggest concern is the number of people moving around in the community before being diagnosed, which was 48 on Wednesday in NSW, state health authorities say.

Sydney is due to exit lockdown on July 30 but Berejiklian has said cases in the community must be near zero first.

She urged people to get vaccinated.

"The vaccine is key to our freedom."

In Victoria, to the south of NSW, all the 26 new cases were linked to known chains of transmission and 24 were in quarantine throughout their infectious period, the state authorities said.

Neighbouring Queensland state closed its border to NSW, citing the outbreak, shutting off one of the most travelled routes in the country.

South Australia state, also under lockdown, reported two new cases as officials track two "superspread events" - gatherings at a winery and a Greek restaurant in the state capital Adelaide.

ECONOMIC HIT

With large swathes of businesses shut down in the country's two largest cities, Frydenberg said the economy would likely contract when GDP figures are published in early September.

"We'll probably expect that the September quarter is a negative, of course," Frydenberg told Australia's Channel 7.

However, Morrison on Wednesday said the central bank believes a second recession in as many years will be avoided.

Australia's economy had boomed to pre-pandemic levels in the early months of this year thanks to low COVID-19 cases.

The country's main airline, Qantas Airways (QAN.AX), said in a memo to staff that domestic capacity had dropped to less than 40% of pre-COVID levels and that staff may be stood down without pay if lockdowns continued for "extended periods". (Reuters)