Australia on Wednesday announced mandatory Covid-19 isolation would be cut to five days and mask requirements lifted on domestic flights -- the most significant easing of restrictions in months.

Prime Minister Anthony Albanese said the country's still-stringent Covid rules would be relaxed slightly from September 9, when isolation periods would be reduced from seven days, giving some relief to businesses struggling with chronic labour shortages.

"This was a proportionate response at this point in the pandemic," Albanese said.

Australia previously rolled out some of the world's most stringent Covid restrictions, sealing off its international borders for two years and locking down most major cities for months on end.

The strategy worked for much of the pandemic but since January there has been an enormous leap in detected cases -- which have now surpassed 10 million.

Deaths have also risen, but high vaccination rates have limited fatalities to 14,000 since the virus first emerged, comparatively low in a country of almost 26 million people.

With workers frequently forced to isolate and fewer people moving to Australia, staff shortages are common.

The country's unemployment rate has fallen to 3.4 percent, after workers snapped up jobs.

Albanese said the relaxed rules would only apply to people without Covid symptoms.

"Clearly, if you have symptoms, we want people to stay home. We want people to act responsibly."