Australia raised the swine flu alert level in the worst hit state of Victoria on Wednesday and warned more areas would follow as the national total topped 500.
Health Minister Nicola Roxon said Victoria, which accounts for about 80 per cent of cases, needed greater protection but stopped short of cancelling sports events.
"I've been advised by the chief medical officer that it's appropriate to move Victoria to a modified 'sustain' phase," she said.
"I've provided that advice to the prime minister, who has agreed that is the appropriate action to take. The rest of the country will remain at 'contain.'"
Roxon said Australia, the most badly affected Asia-Pacific country, now had 502 cases including 395 in Victoria. The vast majority of infections have been reported in the past week.
Victoria's higher "sustain" phase means authorities can not only treat anyone with flu symptoms but also their immediate family, and can carry out blanket testing in risky areas such as schools and hospitals.
"We do expect in the coming days or weeks other jurisdictions will also gradually see this disease spreading through their communities and they will need to move to this phase," Roxon warned.
But she said there was no immediate need to cancel sports events such as Wednesday's State of Origin rugby league match in Melbourne, which is expected to draw 50,000 fans.
Australia had only one case of swine flu just a fortnight ago but the outbreak has exploded since the controversial move to let infected passengers leave a luxury cruise-liner in Sydney last week. The country is now moving into the southern hemisphere winter, and experts say Victoria's high number of cases could be explained by its particularly cool climate.
A World Health Organisation official on Tuesday warned that global pandemic was looming closer as the disease, which surfaced in Mexico in April and has infected some 18,965 people worldwide, killing 117, spreads beyond the Americas.