The wage subsidy scheme will also be extended, and not just for Auckland, which is at Alert Level 3.
The rest of New Zealand stays in relative freedom at Level 2. That means measures such as physical distancing continue but more severe restraints on business apply to Auckland only.
Queenstown Mayor Jim Boult said he was pleasantly surprised that restrictions were not escalated beyond what was announced on Tuesday and by the extension to the wage subsidy.
Tourism and hospitality businesses would have ongoing challenges, however.
"The Auckland market is enormously important to us," he said.
"It will take a long time before anybody gets their head around travelling again."
Minister of Finance Grant Robertson acknowledged in the 5.30pm televised broadcast that the public health response affected businesses across the country.
“This includes tourism operators who are expecting visitors from Auckland, companies that supply Auckland businesses, and the hospitality and retail sectors in other parts of the country now operating under Level 2.”
Southern District Health Board chief executive Chris Fleming said people in the South needed to be vigilant.
That involved those who were sick staying at home, anyone with possible Covid-19 symptoms getting tested and everyone heeding hygiene and distancing protocols.
"Our teams are ready to respond to any cases that may be detected in our district, and plans are in place to enable us to react rapidly if anything changes," he said.
Mr Fleming said both the community and workers across the southern health system were continuing to play their part in the fight against Covid-19.
"While still creating some restrictions, it is something of a relief that we are not being asked to provide our services under greater restrictions at this stage."
Dunedin Mayor Aaron Hawkins said a second outbreak of Covid-19 was inevitable at some point and the challenge now had to be met.
"This response is proportionate to the current situation," he said.
Mr Hawkins said New Zealanders had to remember they were in the fight against Covid-19 together.
Regional parochialism had torn Australia apart and much blame had been apportioned, he said.
"It’s been ugly over there."
Mr Hawkins said New Zealanders had been lulled into a false sense of security and the outbreak would give people pause for reflection.
Otago Polytechnic’s international Auckland campus remained closed but face-to-face teaching would continue at the Dunedin and Central Otago campuses next week.
“We are confident we have implemented a broad range of measures to effectively deal with Covid-related issues," polytechnic chief executive Megan Gibbons said.
Measures at the Te Pa Tauira-Otago Polytechnic student village included no visitors being allowed, split dining shifts and separate resident "bubbles" on each floor.
Polytechnic staff domestic travel on public transport had been suspended.
“We acknowledge this is a stressful and uncertain time for everybody,” Dr Gibbons said.
Dunedin City Baptist team leader Bruce Elder said he was relieved at the announcement.
Parishioners would meet in homes tomorrow because the 100-person limit on gatherings created a problem.
But Mr Elder was upbeat and said the congregation would pray for the city and particularly for people who were vulnerable.
"A lot of people are anxious, hurting and really stressed."
A shorter service than normal would run online.
Prime Minister Jacinda Ardern said the wage subsidy would be extended nationwide until the end of Level 3 restrictions.
"We will use what tools we have to protect jobs, incomes and businesses, as well as people’s health," she said.
Details would be worked out this weekend and the Covid response settings would be reviewed on August 21.
At this stage, the alert levels would remain until August 26.
