The government will spend $130 billion over the next six months to keep about 6 million Australians in jobs.
The "job keeper" payment will be $1500 a fortnight to keep Australians connected to their employers, and treats all Australians in work equally, Prime Minister Scott Morrison said.
Businesses and not-for-profit organisations that lost 30 per cent more of their revenue would be eligible for the payment.
The government has also changed the income threshold for the partner of someone who has lost their job, raising it to $79,000 a year. Previously someone who had lost their job but whose partner earned $48,000 or more couldn't access the job seeker payment.
The announcement helped the sharemarket rally to its best day on record, rising 7 per cent at close.
Both Mr Morrison and Treasurer Josh Frydenberg said the announcement was about "building a bridge" to the other side of the economic crisis caused by the coronavirus.
Mr Frydenberg said the jobkeeper payment was more generous than those introduced in countries like New Zealand and Canada, and would be available to people in all businesses, not just small businesses.
The payments would be made to employers through the tax office, which would use data on the number of employees through the Single Touch Payroll system. Mr Morrison said the payment was to keep workers on at work, and out of Centrelink queues.
The payment would also apply to workers in not-for-profits, as well as New Zealand citizens.
Employees who were "on the books" with their employer on March 1 would be eligible for the program, the Treasurer said, but the payments themselves wouldn't start being paid until May 1.
It is the third round of stimulus announced by the government, with the biggest price tag.
Parliament will need to be recalled to pass the legislation for the package, Mr Morrison said, but the date is yet to be confirmed.
Full-time, part-time and casual workers would all be paid the same, Mr Morrison said.
The Australian share market rallied hard in its final minutes on the news, for its best day ever.
The S&P/ASX200 benchmark index gained 163.1 points in the final 24 minutes of trade to finish Monday up 399 points, or 7.0 per cent, to 5,181.4 points.
The All Ordinaries index rose 319.8 points, or 6.56 per cent, to 5,194.
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