Gatherings have been further restricted to two people, under "radical" and unprecedented measures agreed to by National Cabinet to slow the spread of coronavirus.
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Australia Prime Minister Scott Morrison announced the previous gathering limit of 10 people had been cut to two, after a meeting with state and territory leaders on Sunday night.
Chief Medical Officer Brendan Murphy said the changes were strong but necessary.
"This is radical," he said.
"The vast majority of Australians have done the right thing in the last week.
"We have seen huge evidence of that, but we have also seen some very silly behaviour of people who haven't complied with that, particularly outdoors."
The changes mean the government is now strongly advising against indoor or outdoor gatherings with more than one other person.
But Morrison said the measures were not yet legally binding.
"States and territories will determine whether they proceed to make this an enforceable limit in the same way that the 10-person limit is already being enforced, but agreed that in all cases this is the strong advice," Morrison said.
On Twitter, NSW Premier Gladys Berejiklian said the state "will move quickly to enforce additional restrictions on gatherings to slow Covid-19".
Like the old restrictions, the new limit does not apply to people who live together.
Weddings are still capped at five people and funerals at 10.
Outdoor gyms and skate parks will be closed from Monday, while outdoor boot camps will also be reduced to two people.
"That doesn't really make it a boot camp," Morrison added.
"That makes it a private session with your trainer."
The new measures will come in to effect at midnight on Monday night.
Vulnerable people advised to stay home
The Prime Minister strongly advised that people aged over 70, those with a chronic illness aged over 60, and Indigenous Australians over the age of 50 should stay at home as much as practical.
"This is for their own protection to limit their interaction with others in the community," he said.
"This does not mean they cannot go outside. They can go outside and be accompanied by a support person for the purposes of getting some fresh air, some recreation, but they should limit contact with others as much as possible."
Morrison encouraged those people to contact community organisations or volunteer groups to organise for groceries and medicines to be delivered.
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Moratorium on rental evictions
Morrison said state and territories would be moving to put a temporary ban on evictions of people and businesses unable to meet their commitments due to financial distress.
Measures to address rental stress for both businesses and residents across the country have been considered by National Cabinet for over a week.
"Now there is a lot more work to be done here and my message to tenants, particularly commercial tenants, and commercial landlords, is a very straightforward one," Morrison said.
"We need you to sit down, talk to each other and work this out about looking at the businesses which have been closed, businesses that may have had a significant reduction in their revenues and we need landlords and tenants to sit down and come up with arrangements that enable them to get through this crisis."
He said further work was being done by Federal Treasurer Josh Frydenberg and his state and territory counterparts on commercial tenancies.