The annual New Year Eve fireworks show in Melbourne has been cancelled and replaced with a two-day street food festival this year due to the Covid-19 pandemic, the City Council said on Monday.

The change has been made to avoid large-scale outdoor gathering as the fireworks show usually attracts about 400,000 people to the second largest Australian city which could become a public health threat during a pandemic, Xinhua news agency quoted the Council as saying in a statement.

Instead, dining precincts will be set up across the city of Melbourne, encouraging people to enjoy their New Year celebrations at more than 50 venues, some are located at the most popular eat streets such as Flinders Lane and Little Bourke Street.

The Lord Mayor of Melbourne Sally Capp said the New Year Street Feasts will support local hospitality businesses that had been hit hard during the pandemic lockdown.

"This has been an incredibly tough year and we want to mark its end by celebrating and supporting Melbourne's wonderful cafes, bars and restaurants," Capp said.

"We are tailoring a program to safely encourage more patrons into our incredible and deserving hospitality businesses that have struggled through lockdown restrictions."

The cancellation came after Melbourne ended its Covid-19 lockdown which lasted for almost four months.

As of Monday, the Australian state of Victoria, where Melbourne is the capital, recorded its 17th consecutive day without any new case or virus-related deaths.

In a similar move last week, New South Wales (NSW) Premier Gladys Berejiklian had announced that Sydney's New Year's Eve firework display will be scaled down by several minutes and spectators will be banned from harbour-side vantage points in the wake of the pandemic.

Due to its time zone, Sydney usually hosts the first major New Year's Eve celebrations of the globe, centering on the Harbour Bridge and Opera House, in a display which attracts thousands of people to the harbour and surrounding area.