NSW Health is urging people to keep wearing masks indoors, however Premier Dominic Perrottet remains reluctant to re-introduce mask mandates that were eased last week, saying it was time for "personal responsibility".
"We are treating the people of our state like adults," he said on Monday.
NSW recorded 2501 COVID-19 cases in the 24 hours until 8pm on Sunday - a drop of 65 cases on the previous day's record high of 2566.
However, the number of people in hospital is gradually creeping up and health experts say cases will explode in January without a return to some restrictions.
There were no deaths on Sunday but there are now 261 COVID-19 patients in hospital - up from 227 - and 33 people are in ICU - up from 28.
Dan Suan, an immunologist at Westmead Hospital, says the new Omicron variant is much more contagious than any previous strain.
"Sydney is sleepwalking into a catastrophic disaster in January if we don't do something about it right now," he said in a Facebook post.
"The only people that are really really protected from the Omicron infection are people who have a normal immune system and have been triple vaccinated."
With Christmas fast approaching, Mr Perrottet says case numbers are bound to rise and everyone is "likely to have a close encounter with COVID".
"We are taking a balanced and proportionate response" and the government will adjust its settings if required, he said.
"We need to stand strong. We are going to lead our nation out of the pandemic ... we are ready," he said.
"We need to also move away from fear and move to hope and confidence."
The premier again urged people to vaccinated and get a booster shot as soon as possible, saying state vaccination hubs will remain open over the Christmas break.
Of the 33 people in ICU, 26 of them are unvaccinated, proving that vaccination was the best protection against the virus, he said.
"Look at those numbers. They don't lie. It is the best way to protect you and your family," he said.
Meanwhile, a survey commissioned by the Tourism & Transport Forum has found four out of five Australians have now either cancelled or are undecided over their summer holiday travel plans, while one in two have no confidence in travelling interstate.
Chief executive Margy Osmond said the national survey of 1500 people revealed the concerns of three in ten Australians had increased following the emergence of Omicron with the same number either cancelling or postponing their travel plans.
Seven out of 10 are waiting for more information before making a decision.
REX Airlines deputy chairman John Sharp said people had been cancelling Christmas travel plans.
"So they're either nervous about catching coronavirus or alternatively worried that they might be in a close contact to somebody who has got coronavirus and therefore they will be put into quarantine," he told the Nine Network on Monday.
"When you travel, you are obviously going to be in very close contact with people and so the risks people are assessing are quite high. So we're seeing cancellations now happening."
A total of 144,368 tests were carried out and 94.9 per cent of people aged 16 and older have had one dose of a COVID-19 vaccine, while 93.4 per cent of people are fully jabbed.
More than 81 per cent of people aged 12-15 have had one dose of a vaccine and 78.1 per cent have had both doses.
13°C