Reserve Bank (RBA) Governor Philip Lowe gave an address after cutting Australia's cash rate to a record low 0.25% and commencing the purchase of government bonds.
The central bank also announced $90 billion worth of funding for lenders, with the provision they increase lending to small and medium-sized businesses.
The measures were announced amid an impending potential recession as a result from the economic fallout from COVID-19.
Dr Lowe said these were unprecedented times but Australia was well positioned to come out the other side.
"Undeniably, what we are facing today is a very serious situation, but it is something that is temporary," he said.
"As we deal with it as best we can, we also need to look to the other side when things will recover.
"When we do get to that other side, all those fundamentals that have made Australia such a successful and prosperous country will still be there."
Dr Lowe said to get to that other side a bridge was needed: A bridge built by the RBA, the Government, the Treasury, financial regulators and the banks.
The Governor then went on to explain the other measures the RBA had announced today in detail and how they would assist the economy through this turbulent time.
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A reduction in the cash rate
Over the past year the cash rate has declined by 125 basis points and now sits at 0.25%, where it will stay for some time, according to Dr Lowe.
"At its meeting yesterday, the Board also agreed that we would not increase the cash rate from its current level until progress was made towards full employment and that we were confident that inflation will be sustainably within the 2–3% range," he said.
"This means that we are likely to be at this level of interest rates for an extended period."
Dr Lowe said the RBA expected unemployment to significantly rise as a result of the coronavirus and the full economic impact was not yet known.
"But we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months."
"We are also expecting significant job losses. The scale of these losses will depend on the ability of businesses to keep workers on during this difficult period."
A target yield on 3-year Australia government bonds
With the cash rate almost at its bottom, the RBA was forced to use unconventional policy and purchase government bonds.
Dr Lowe said the purchase of 3-year Australian Government Securities would complement the cash rate cuts that have been made.
"In particular, we are targeting the yield on 3-year Australian Government Securities (AGS) and we have set this target at around 0.25%, the same as the cash rate," he said.
"Over recent weeks, the yield on 3-year AGS has averaged 0.45%, so this represents a material reduction."
Typically, the purchase of government bonds is considered quantitative easing, but Dr Lowe said this was not the case.
"Rather than quantities or the size of our balance sheet, our focus is very much on the price of money and credit."
"Our objective here is to provide support for low funding costs across the entire economy.
"By lowering this important benchmark interest rate, we will add to the downward pressure on borrowing costs for financial institutions, households and businesses."
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Funding for lenders to support small and medium-sized business
Dr Lowe said this scheme had two objectives: To lower funding costs for the entire banking system and to provide incentives for lenders to support credit to small and medium-sized businesses (SMEs).
"Many small businesses are going to find the coming months very difficult as their sales dry up and they support their staff," he said.
"Assisting small businesses through this period will help us make that bridge to the other side when the recovery takes place.
Under this new facility, authorised deposit-taking institutions (ADIs) in total will have access to at least $90 billion in funding.
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