Sydney health authorities were on Thursday hunting the source of their first local Covid-19 cases in more than a month, as New Zealand paused a quarantine-free travel bubble with the city.

A man in his 50s and his wife have tested positive for the virus, triggering warnings for almost two dozen locations around Sydney that they visited while believed to be contagious.

The couple are the city's first recorded cases of coronavirus transmission outside hotel quarantine since the start of April.

New South Wales state premier Gladys Berejiklian said from 5 pm on Thursday, Sydney's five million residents would again have to wear masks on public transport and in indoor venues.

"We believe this is a proportionate response to the risk we have ahead of us," Berejiklian told reporters.

Sewage testing revealed traces of the virus in the city's inner west.

A man in his 50s and his wife have tested positive for the virus, triggering warnings for a string of locations around the city
A man in his 50s and his wife have tested positive for the virus, triggering warnings for a string of locations around the city AFP / SAEED KHAN

Following the announcement, New Zealand said it would put a travel bubble with the state on hold until the source of the infection was better understood.

"Now, this isn't a decision we take lightly," said Chris Hipkins, New Zealand's minister for Covid-19 response.

"But we indicated when we opened up the trans-Tasman travel bubble that we would continue to be cautious."

Travellers on either side of the Tasman Sea who visited Sydney locations flagged by New South Wales health authorities would have to isolate where they were, he added.

According to the state's top health official, genomic testing linked the man's infection to a returned traveller from the United States who had been staying in one of the city's quarantine hotels.

How the virus leaked into the community is being investigated.

Australia has no widespread community transmission of Covid-19, but has seen several outbreaks emerge from hotel quarantine facilities, causing disruptive city lockdowns.