Ethnically diverse communities are potentially exposed to multiple and compounding impacts of COVID‐19, owing to social and cultural interactions, household crowding, employment in exposed occupations and other socioeconomic conditions. In this study, we quantify and analyse these impacts for local councils in Australia's two largest cities, Sydney and Melbourne across five outcomes: infections, excess deaths, the speed of vaccination, unemployment and breaches of public health orders issued by the Police. Residents of the most linguistically diverse councils in Sydney were 5.6 times more likely to have contracted COVID‐19 up to 1 December 2021 than residents of the least diverse councils and 2.9 times more likely in the most diverse councils in Melbourne. Excess deaths were 27% higher in diverse communities across 2020 and 2021, the time spent unvaccinated was 1.3 times higher and the increase in the unemployment rate was between 1.7 and 5.1 times higher depending on the city. Public health breaches were 2.2 times higher in the most diverse areas of Sydney. Spatial regression models indicate that the differences in infections, excess deaths, speed of vaccination and public health breaches are largely explained by the economic characteristics of local communities. These disproportionate impacts appear to reflect and reinforce social and economic inequalities and pose a threat to social cohesion.