The country's benchmark S&P/ASX 200 index closed down 421.3 points or 7.36 percent at 5304.6 points, while the broader All Ordinaries index was down 418.40 points or 7.23 percent at 5370.90.
The sharp plunge represented the worst one-day percentage decline since the 2008 financial crisis, surpassing the 7.33 percent selloff on Monday.
Despite the stimulus packages announced by the Australian government earlier in the day, the market started morning trading with a roughly 3-percent decline, which worsened sharply following news of a U.S. travel ban imposed on Europe.
Travel related firms were some of the biggest losers with Qantas down 9.9 percent, Flight Centre down 18.2 percent and Webjet down 19.7 percent.
Robert Rennie, head of Financial Market Strategy of the Westpac Bank told Xinhua that the U.S. announcement of a travel ban undermined confidence in a couple of markets.
"I think that the global equity markets were probably hoping for a little bit more than travel bans, more domestic policy looking at testing and mitigating the domestic spread of the virus within the U.S." he said.
According to Rennie, so far a coordinated global response and cooperation in containing the virus has been lacking and is contributing to the volatility being felt by share markets.
"What I think global equity markets would like to see is a coordinated global response rather than individual countries reaching for travel bans and not addressing the testing and containment within the domestic economies," he said.
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