In the western Gisborne region of Victoria, where the outbreak began, officials say more than half the local water supplies have been contaminated.
More than 60 people have been admitted to hospital.
A major public health emergency has been declared.
The Health Department says there have been three cases of coronavirus in Victoria, which is considered a hotspot for the virus.
The outbreak is spreading across the country, but has now been brought under control.
The state’s chief medical officer says the numbers of infections have fallen dramatically in recent days, and there is no new threat to the community.
The Victorian government says it is “working closely” with the states Department of Health, the Federal Health Department and the Australian Federal Police.
“We’ve made progress in isolating the sources of the contamination and we’re hopeful that the water supply will be safe,” Health Minister James Merlino told ABC Radio Melbourne.
In the state capital, Brisbane, the Health Department has advised residents to stay away from the water, and the city’s emergency management team has been asked to help with the investigation.
Authorities say the water supplies in the affected areas have been cleaned, and water has been delivered to affected areas.
A total of 1,974 cases have been reported across Victoria, with the number of confirmed cases in the state now at 1,097.
At least two people in Brisbane are being treated in intensive care and are in isolation, while another woman has tested positive for the disease.
More than 400 people are being monitored in intensive-care units at Brisbane General Hospital.
Health Minister James, the Minister for Emergency Services, and a health official from Victoria are at the Queensland Government House, where they have been meeting with health authorities.
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