The national economic recovery has been threatened by a six-week return to lockdown for 5 million Melbourne residents and businesses, to avoid COVID-19 spiralling out of control after Victoria recorded a record 191 new virus cases.

The sharemarket fell on the news, as banks, real estate and travel-related companies bore the brunt of the sell-off and business lobby Ai Group slammed the move as a "retrograde step" that would cause "untold damage to the economy and employment".