The Morrison government has signalled a second round of stimulus is coming for sectors bearing the brunt of the economic shock triggered by the coronavirus pandemic including airlines, tourism, events, sport and the arts – as it redoubles efforts to stave off a crippling downturn.

As financial markets endured another day of panic selling – with the ASX200 down a record 537.3 points or 9.7% at the close and with the Reserve Bank telegraphing another potential emergency rate cut on Thursday as well as preparedness to buy government bonds in the secondary market – the government flagged a second round of pump priming only a week after signing off on a $17bn injection.

Tuesday’s plunge on the ASX was the worst one-day sell-off since 1987.

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With the financial markets febrile, reflecting the magnitude of the risks posed by the pandemic, and with New South Wales reporting an exponential increase in coronavirus cases, Scott Morrison spent the day in discussion with cabinet colleagues, including Josh Frydenberg and Mathias Cormann, and ministers with portfolios on the frontline of the unfolding economic shock.

Morrison returned to Canberra on Monday night and cabinet is scheduled to meet on Tuesday. The premiers and the prime minister will speak on Tuesday evening.

The government is eyeing fresh support measures targeted at the businesses most at risk of collapse. The precise timing for unveiling round two of the stimulus package is unclear, but government sources say options are being worked up urgently, and the package will be announced well ahead of the May budget, not in the May budget, which was the plan last week.

Events are moving so rapidly the government is telegraphing round two even though it is yet to legislate its first tranche of stimulus measures. Legislating round one will happen next week, with parliament expected to gather for a short session with the building in a partial lockdown.

The terms of that sitting will have to be agreed between the leaders. A second government MP from Queensland, Susan McDonald, has now tested positive to the virus. The home affairs minister, Peter Dutton, was diagnosed last Friday.

The tourism minister, Simon Birmingham, who spoke to Morrison twice on Monday from north Queensland, said the government was looking at “unprecedented circumstances and therefore we’re considering everything necessary to try to get as many businesses through this as possible”.

“We effectively have virtually no international tourists coming to Australia at present,” Birmingham told the ABC.

“That is a massive hit for regions like north Queensland … and for many other parts of the Australian economy and, of course, that is putting immense pressure on businesses in terms of their viability, and that flows through in terms of the decisions they have to sadly make about their workforce.”

Federal, state and territory governments have resolved, as part of efforts to slow the trajectory of community transmission of the illness, that all international arrivals to Australia will have to self-isolate for a period of 14 days or face penalties including fines. Cruise ship arrivals will also be banned for at least 30 days.

Schools have not yet been shut, but Morrison flagged in a Facebook live session on Monday evening that advice could change “in the coming weeks”. There are also curbs on non-essential gatherings of more than 500 people – advice that looks set to be strengthened significantly as soon as Tuesday.

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Social distancing restrictions are necessary to slow the spread of the illness, but they will have a crippling financial impact on a number of industries from the arts to events management, which creates the potential for mass lay-offs across the economy and a significant spike in the unemployment rate.

Birmingham said the government would not be able to “save every business right around the country” but the current objective was “to try to get as many businesses through this as possible, because when we get to the other side, we need to be able to scale up activity again quickly”.

Given the ongoing volatility on the financial markets, and with bank stocks hard hit on Monday, the Council of Financial Regulators – the coordinating body for Australia’s main financial regulatory agencies – issued a statement saying it intended to meet with major lenders later this week “to discuss how they can best support households and businesses through this challenging period”.

Frydenberg met with the chief executives of the major banks last week. The treasurer said in a statement to Guardian Australia on Monday night that all the banks had reaffirmed that they are “open for business and are ready to lend and work with businesses to support those that are impacted”.

“The banks are working collaboratively with the government regarding the sharing of data on economic and lending trends during this period,” Frydenberg said. “We are receiving real-time information from the banks and from the Australian Bureau of Statistics to understand how the government’s economic response measures will be impacting the economy.

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“The banks are also implementing a number of measures to support their customers, including passing on recent interest rate cuts by the RBA in full, which is welcomed by the government, and deferring interest rate payments or other financial commitments – and we continue to encourage that support.”

The Council of Financial Regulators said Australia’s banking system was well capitalised and the RBA was continuing to support the liquidity of the system. Given the escalating concerns about the viability of businesses starved of revenue and customers, the council said it would be emphasising in meetings with banks and other lenders “the importance of a continuing supply of credit, particularly to small businesses”.

The council said the banking and corporate regulators Apra and Asic understood it was critical to support the continued flow of credit to affected customers and industries in the current environment, and would encourage banks “to work constructively with affected customers during any period of disruption”.