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The increase was welcomed by the co-owner of Dunedin restaurant Etrusco, Zane Gianone, who had a large space to fill.
"It will almost feel normal again," Mr Gianone said.
In Queenstown, Blue Kanu owner and director Karen Hattaway said operating with a limit of 50 guests had been tricky.
The new limit from 11.59 tonight would make it more realistic for the business to open, although she felt for her Auckland counterparts, who were at least a fortnight from Level 2 conditions.
New community cases of Covid-19 cases in Waikato did not deter the Government from dropping Auckland from Level 4 to 3, but Prime Minister Jacinda Ardern reiterated yesterday nowhere else in the country would drop below Level 2 before the end of Auckland’s lockdown.
Ms Ardern said Level 4 had done its job, but Aucklanders needed to stay home in their bubbles in Level 3.
"It is not a situation where we are broadly opening up."
The Prime Minister said, despite the South Island still having had no cases of Covid-19 in almost a year, there remained a real risk the disease could spread from Auckland.
In the past week, people have allegedly breached Level 4 restrictions and travelled from Auckland to Wellington and Wanaka.
Situations such as a truck driver who had unwittingly gone to Tauranga while infectious showed that even appropriate travel contained an element of risk, Ms Ardern said.
Otago Chamber of Commerce acting chief executive Nicky Aldridge-Masters said it was disappointing the South Island had to remain in Level 2, but she understood the rationale for keeping it there during an outbreak of the Covid-19 Delta variant.
Raising the gatherings limit would make some events more viable.
Hospitality New Zealand Southland branch president Graham Hawkes said restrictions on the hospitality industry remained onerous.
Business owners wondered if they could survive the continuation of a restricted environment, he said.
Mr Hawkes said customers were asked to behave in unnatural ways, such as not approaching a bar for service.
Business conditions remained challenging for accommodation providers, because of lingering reluctance to travel, he said.
There are now 1071 cases associated with the outbreak and 141 active locations of interest.
Almost all of those are in Auckland, but authorities yesterday added Mangatangi School in rural Waikato to that list.
Director-general of health Dr Ashley Bloomfield yesterday placed a health order on the area, creating what Ms Ardern called "a bespoke Level 4 lockdown requirement" for five days.
University of Otago health sciences professor Sue Crengle, co-leader of the National Maori Pandemic Group, was worried about the Waikato outbreak and had urged the Government to keep restrictions tight.
"There are many Maori communities in the upper North Island and we want to make sure they are protected as much as possible," Prof Crengle said.
Ms Ardern said the temporary Level 4 should contain any further cases in the small community.
- There were 22 new cases of Covid-19 in the community yesterday, the Ministry of Health confirmed.
Three of the new cases were in Whakatiwai but were being counted in the Auckland total, the ministry said.
The number of people fully vaccinated yesterday was 1,618,673, or 38% of the eligible population.