The number of new daily COVID-19 cases has halved in the past 24 hours, with NSW finding 15 new cases linked to the Avalon cluster.
Case numbers were down from 30 cases announced on Sunday, and were found among "record" test numbers of more than 38,000.
There are now 83 cases linked to the cluster.
Premier Gladys Berejiklian said the reduction in cases was "pleasing" and also noted that all new cases were linked directly to the Avalon cluster, but that a "continued hard effort is required to continue that downward trend".
"We will consider our position about what Christmas and beyond Wednesday midnight look like on Wednesday morning," she said.
Ms Berejiklian said one days cases was "not a trend", and said the government would make a final call about what restrictions would be in place for Christmas day on Wednesday morning.
"I'd love to be able to tell everyone what Christmas might look like in NSW and the Northern Beaches, but I'm not in a position to do that," she said.
"If we see the trend continue that will give us more confidence to consider what Thursday and Friday will look like."
She said people should keep monitoring the government website as much as possible as more venues were being added to the list of places which may have been exposed to the virus.
"We have the best contact tracing team on the planet - but they can't contact people whose details we don't have," she said, adding it was vital for businesses to have systems in place to get people's information if they were planning to stay open.
She also urged people to wear masks.
"Please make sure if you're in an indoor setting, if you're catching public transport, you need to be wearing a mask," she said.
"If you're going grocery shopping you should be wearing a mask. Don't think you're immune - we know how absolutely contagious this virus is."
The Deputy Premier and Nationals leader John Barilaro issued a message for regional NSW, encouraging "calmness" and saying the government was still encouraging people to "flock to the regions" over Christmas.
However he said people had to take responsibility and not travel if they had any symptoms or exposure to risk.
"Our health system in the region can manage this, but we don't want it to be overwhelmed," he said.
He also addressed the "outer metro areas of Sydney" asking people to "be mature, be understanding that you could cause some level of risk".
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