Also on Monday (NZ time) the US Federal Reserve took emergency action, slashing its benchmark interest rate by a full percentage point to nearly zero and announced it would purchase more Treasury securities to encourage lending to try to offset the impact of the coronavirus outbreak.
"The negative economic implications of the COVID-19 virus continue to rise warranting further monetary stimulus," the Reserve Bank said in a statement.
"Since the outbreak of the virus, global trade, travel, and business and consumer spending have been curtailed significantly. Increasingly, governments internationally have imposed a variety of restraints on people movement within and across national borders in order to mitigate the virus transmission."
The Reserve Bank has also decided to delay the implementation of controversial new capital rules which would have required the banks to hold more capital on their balance sheets.
This, the bank said, would lead to another $47 billion in lending than would have been the case if the moves went ahead. Banks had long warned the move could stifle credit, especially in a time of economic strain.
"The negative impact on the New Zealand economy is, and will continue to be, significant. Demand for New Zealand's goods and services will be constrained, as will domestic production. Spending and investment will be subdued for an extended period while the responses to the COVID-19 virus evolve."
ASB chief economist Nick Tuffley said the Reserve Bank, and the banking sector, were working to keep credit in the economy, with the Reserve Bank looking to buy bonds which "the Government is likely to need to issue heavily soon as it spends to prop up the economy".