Prime Minister Scott Morrison said the country would look to bring more Australians home, raising the cap from 4000 a week, and suggested an eventual travel bubble with New Zealand would boost tourism and help revive the economy, which has fallen into recession for the first time since 1991.
Seven of Australia's eight state and territory leaders agreed to map out a path to open borders by December, by coming up with a definition for "hot spots" to manage travel around the country, Morrison said following a National Cabinet meeting.
He said he had told New Zealand Prime Minister Jacinda Ardern that Australia would also look to apply the same hotspot approach to New Zealand.
"Further support has been provided to assist those Australians, particularly in hardship overseas ... as part of that approach I spoke to Prime Minister Ardern this morning and what I advised her was that Australia will be looking to apply the same hotspot approach to New Zealand.
"That means when we're in a position to do so, and when the acting chief medical officer has come to a set of arrangements with New Zealand, then we would be able to have New Zealanders come to Australia.
"That doesn't mean Australians can go to New Zealand, that's a matter for Prime Minister Ardern, but if there's no Covid in Christchurch, and there's no Covid in Queensland, then there's no reason both of them can't come to Sydney.
"That will mean, I think, an important boost for our tourist economy, whether it's in New South Wales or anywhere else."
He spoke about allowing visiting New Zealanders to enter without having to go into isolation or quarantine.
"The idea that New Zealanders would not have to go into quarantine because they're coming from Covid-free areas would also free up places in quarantine.
"Equally, if states aren't requiring Australians coming from areas where there is no Covid cases, like the ACT, and that they don't have to go into hotel quarantine in places, well, that obviously frees up more capacity as well."
Australia's biggest state Western Australia, which has not had a local transmission for 129 days and has no social or business restrictions, rejected the plan to re-open its border until the eastern states contain the coronavirus.
Western Australia state premier Mark McGowan said the desert borders which separate his state would stay closed to save lives and protect the nation's largest mining operations.
Australia's early international border closures, lockdowns and social distancing restrictions has seen it record far fewer coronavirus infections and deaths than other nations. Nationally there have been around 26,100 infections and 737 deaths.
Australia's tourism industry welcomed the push to reopen internal borders in time for summer holidays and Christmas.
"Our industry remains on its knees in the fight of its life and has each month been losing thousands of jobs and $6 billion in activity from the forced shutdown of domestic travel alone," said Margy Osmond, chief executive of the Tourism and Transport Forum.
Victoria, the second-most populous state, is the epicentre of Australia's latest wave of cases, mainly in the state capital Melbourne. Daily new infections have dropped to double digits this week thanks to a strict lockdown imposed on Aug 2.
Melbourne is nearing the end of the six-week lockdown which includes a night time curfew, an hour a day of outdoor exercise and travel limits to within 5km of home. Victoria state premier Daniel Andrews is due to outline plans on Sunday for easing restrictions.
Businesses have been calling for the economy to reopen but Andrews does not want to lift restrictions quickly and then be forced to shut down again with another wave of infections.
"There is simply no alternative but to ease out of these restrictions in a safe and steady way," Andrews told reporters.
The strict lockdown has led to calls for protests this weekend, which police have aggressively tried to shut down.
- additional reporting RNZ
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Morrison is against elimination of the virus. He has lost control of the country because most of the state Premiers refused to follow his insane path. He is no better than tRump as far as the virus is concerned, all he does is refuse to accept responsibility.