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All of New Zealand outside Auckland will move to Level 2 at 11.59pm today, Prime Minister Jacinda Ardern announced yesterday.
However, this will be a Level 2 tweaked for the Delta variant.
It comes with beefed-up measures, including mandatory masks and QR code scanning in public venues.
Gathering limits at hospitality and event venues have been reduced to 50 people indoors and 100 outdoors.
Other public areas will be subject to 2m spacing between patrons.
Schools will not accept pupils immediately, but have been given 48 hours to prepare to reopen on Thursday.
Business responses to the new settings were mixed, as hospitality providers questioned the indoor patron limits.
Speight’s Ale House owner Mark Scully, of Dunedin, said although it would be great to be back under Level 2, the reduced patron limit was a surprise.
"I think it’s just another example of a well-meaning government being short on detail when it comes to execution.
"To have 50 across the board with no consideration for the size of the premises is ridiculous."
He said it would have made sense to set admission limits based on a venue’s listed maximum occupancy.
"For example, our house can hold 271 people legally.
"... it shouldn’t have been hard to simply make a number of say you are allowed a quarter of your capacity, or a third of your capacity."
Queenstown’s Flame Bar & Grill co-owner Lou McDowell said the announcement was great news for the resort town generally, but the 50-person limit on indoor venues was "pretty devastating news" from a business standpoint.
A usual maximum occupancy of 120 patrons meant Flame would be operating at less than half capacity while its fixed costs remained the same.
"It’s certainly not the news we wanted," Ms McDowell said.
"If you’re a smaller venue, it might be a bit more workable.
"The larger venues will be scratching their heads wondering how to make that work."
She hoped Level 1 was not too far away "so we can get back to normal".
"Although to be honest, Queenstown won’t get back to normal until Auckland opens up anyway."
Fitness enthusiasts were excited to return to the gym.
World Gym owner Phil Shaw, of Dunedin, said he had received about 40 text messages from excited clients in the first hour after the level announcement.
He had been preparing for a potential move to Level 2 since last Thursday, and would be returning today to space out equipment more to allow a 2m gap between gym users.
Aart On St Andrew hairstylists owner Darryl McNamara said he was expecting to be very busy when he reopened the doors of the Dunedin business.
"We’ve got three weeks of clients that we’ve got to re-book when we’re already booked out, but we’ll get there."
Mandatory face masks provided a new challenge, and clients could expect "if they bring in face coverings, they might have slightly wet straps by the time they leave".
The indoor gatherings limit provided challenges to faith communities.
The Roman Catholic Bishop of Dunedin, the Most Rev Michael Dooley, said it would make gathering for Sunday Mass problematic for most congregations, while First Church of Otago senior minister the Rev Ed Masters said church elders would meet tomorrow to discuss what could be done under Level 2.
Dunedin Mayor Aaron Hawkins said he welcomed the Level 2 announcement.
"It’s great that we’re at the point that restrictions can start to ease, and I’m sure I’m not alone in welcoming the reopening of schools this week, but we’ve had to fight hard to get to this point.
"We can’t afford to get complacent, as many of us were in the ‘peacetime’ that preceded the current outbreak."
Queenstown Lakes Mayor Jim Boult said it was good news people from outside Auckland could travel to the district again, but as Aucklanders made up more than half its domestic visitors they would continue to be missed.
NZSki chief executive Paul Anderson said he expected tomorrow would be a bumper day at the company’s three skifields, particularly given schools would not open until Thursday morning and snow was forecast from tomorrow.
Mr Anderson said work was under way to change indoor seating "zones" to cater for the 50-person limit.
Tertiary education providers were working through what Level 2 meant for them.
The University of Otago and Otago Polytechnic were not expected to announce their Level 2 arrangements until later today.
The alert level change decision came after 20 new cases of Covid-19 were reported in the community yesterday, all in Auckland.
The total number of cases in the community is 821.