The prime minister told reporters on Sunday night members of the same household could still mingle together both inside and outside, but a limit of two would be set for all other interactions.
The two-person rule will be in place from midnight on Monday.
Morrison added that all “public playgrounds, outside gyms and skate parks” would be closed as of Monday.
As the number of confirmed coronavirus cases headed towards 4000 and the death toll reached 16, Morrison told reporters on Sunday night Australians need to stay home unless they are shopping for food and other essentials, attending medical appointments, exercising, or attending work or education.
He said the “strong advice” was also that people aged 70 and over “should stay at home and self-isolate for their own protection”.
The same advice applies to people over 60 with a chronic illness, and Indigenous people over the age of 50.
“This does not mean they cannot go outside,” Morrison said.
“They can go outside and be accompanied by a support person for the purposes of getting fresh air and recreation, but should limit contact with others as much as possible.”
Morrison said it was important for some retail outlets to remain open for now to allow people to gather essential items ahead of further quarantine measures, but he warned the closure of more businesses was imminent.
“As time goes on the national cabinet will continue to look at a lot of these businesses and may have to make further decisions in these areas, and in some cases that may not be too far from now,” he said.
The chief medical officer, Brendan Murphy, said the tightened restrictions will help isolate confirmed cases and embark on contact tracing.
He said the rate of new infections across the nation had slowed, but that was not enough to declare any breakthrough and people should not become complacent.
“We have to slow it further and we have to stop the thing that’s worrying us most, which is community transmissions,” he said.
Sunday night’s announcements include a moratorium on evictions of people as a result of financial distress for the next six months under state laws.
Canberra continues to work on other elements of a rental relief package.
Morrison said commercial landlords and tenants needed “to sit down, talk to each other and work this out”, and he said banks had a role to play.
“We need landlords and tenants to sit down and come up with arrangements that enable them to get through this crisis so on the other side, the landlord has a tenant, which is a business that can pay rent, and the business is a business that can re-emerge on the other side of this and be able to go on and employ people,” he said.
“We want the banks to help them achieve this outcome.”
The government has also released new ways of receiving information on coronavirus.
If you are on WhatsApp, you can add the Australian government chat, which will provide information on what is happening in Australia, including the latest figures and restrictions.
There is also a coronavirus app in the Apple store and Google Play store.
Both initiatives have been launched in an attempt to help clear up some of the confusion over Australia’s restrictions, as well as provide as much information to people as possible.
