The Byron Bay Blues Festival has been cancelled for the second year running after a local COVID-19 infection was discovered overnight.

The event was supposed to start tomorrow, and organisers were expecting up to 15,000 people to attend.

In a statement, NSW Health acknowledged the event's cancellation was "disappointing" but reiterated that urgent contact tracing was taking place.

"NSW Health advises that the Minister for Health (Brad Hazzard) has signed a public health order cancelling the planned Bluesfest over the Easter period," the statement said.

"This action is being taken to minimise the risk of the highly infectious COVID-19 variant of concern being transmitted in the local area, as well as across states and territories.

"Infectious Queensland travellers attended a number of venues in the Byron Bay area and the new locally acquired case was infected at one of these venues."

Mr Hazzard said the 2021 festival would be rescheduled and encouraged would-be attendees to hold onto their tickets.

"While the cancellation of Bluesfest is disappointing for music lovers and the local community, I hope that ticket holders would support Bluesfest and hold on to their tickets, as I understand Bluesfest will be working on a new date as soon as possible," he said.

In a statement, Bluesfest organisers said they were "heartbroken" and that the team had worked "day and night for a year" to achieve their approved COVID-19 Safety Plan.

"Sadly [NSW Health and Mr Hazzard] have arrived at the decision that it is in the interests of the safety of everyone the festival be cancelled over the Easter period and rescheduled to a later date."

Bluesfest director Peter Noble said it was "One of the most difficult statements I have ever had to make". 

"We really wanted to be at the forefront of the return of live music at pre-COVID-19 level," he said.

"We feel deeply for everybody affected, the fans, the artists, and the hard-working Bluesfest team. But in the end, the health of our community must come first."

Hawkesbury local Jess Shanahan told the ABC she had just pulled over at Coffs Harbour on the mid-north coast after she heard Bluesfest had been cancelled.

She was about seven hours into her drive north and was now contemplating whether she would forfeit her accommodation or continue her trip into the holiday hotspot. 

"We're pretty annoyed and not sure what to do. Obviously, if we go to Byron it's risky — spending five or six days will mean the possibility of going into a place a COVID case has been," she said.

"Then again only two cases, so it's bad, but not as bad as it could be."

Ms Shanahan said she had planned to go to Bluesfest last year before it was cancelled.

"This year's festival was supposed to be one of the first festivals that has gone back to normal," she said.

"The only place in New South Wales where there's a COVID case is Byron, so it's just disappointing that this is where this is all happening."

The case has been traced to the Byron Beach Hotel, where an infected person from Brisbane visited on March 26.

The new case, a man in his 20s, attended the pub with three friends, who have since tested negative for COVID-19.

Among the new restrictions,

* Masks will be mandatory while shopping and using public transport, taxis and ride-sharing services

* Masks will be mandatory for hospitality workers

* The four-square-metre rule will apply in hospitality venues, where patrons must also be seated

* No more than 30 visitors will be allowed in homes

On Monday, festival organisers had reiterated plans to continue with the event this week.