NSW has reached a 'critical stage' of the pandemic, with Premier Gladys Berejiklian urging caution while easing state restrictions.
On Wednesday, Ms Berejiklian announced from 12.01 Friday, NSW residents were allowed 50 guests in their home, up from the current 30-person restriction.
NSW has recorded 38 days without a local COVID case.
Singing and dancing is back, with 30 people able to sing in choirs and 30 people allowed on the dance floor at weddings.
Ms Berejiklian specified all guests at a wedding could dance but in turns, with only 30 people allowed on dance floors at one time.
Congregations are once again allowed to sing, however if they are going to they must wear a mask and move back to the four-square-metre rule
She said if COVID cases remain under control, the government would reevaluate the 300-person cap of people at weddings in three weeks.
Residents will also be able to stand and have a drink in hospitality venues from March 17.
Gym classes can increase to 50 people, subject to the four-square-metre rule. Cinemas can return to 100 per cent capacity.
Despite the easing of restrictions, Ms Berejiklian and Health Minister Brad Hazzard urged residents to stay alert.
"You can have 50 people in your house, but you need to do so with caution," she said.
"We're at a critical stage of the pandemic, the vaccination rollout has started and I'm confident people will take up the opportunity for the vaccine, but in the meantime we have to be as vigilant as ever and make sure you don't get complacent."
Mr Hazzard said residents must maintain commonsense and recognise how lucky NSW was to be able to lessen restrictions compared to what is occurring in other nations.
"NSW is opening up more and more but as we do that people can't be complacent, the complacency issue has been an issue from the go but as we open up... people think it's all over.. it's not all over," he said. "Take it seriously."
Ms Berejiklian said the government would be increasing enforcement of COVID requirements as some hospitality venues and residents had become complacent.
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