With mental health firmly on the Council of Australian Governments' (COAG) agenda, Mr Howard said he was looking to the states to also contribute.
"I stress that the commonwealth will do these things irrespective of the response of the states, but naturally we would look to the states in the spirit of cooperation that has been evident thus far to match in their areas of responsibility with an equivalent amount," Mr Howard said.
Mr Howard said most people would agree that there were many gaps when it comes to mental health care in Australia. The package will boost the number of mental health workers, provide more respite places for families looking after a mentally ill loved one and provide more money for community awareness campaigns.
"We're going to make our contribution in four main areas," Mr Howard said.
"We're going to provide more health services in the community including support for more teamwork arrangements for psychiatrists, GPs, psychologists and mental health nurses.
"We're going to provide new non clinical and respite services for people with mental illness, their families and carers including an additional injection into an area of which I think is in tragic need in the community and that is the plight of elderly parents caring for often adult children in their middle years with profound mental disabilities."
As announced recently, from November 1 this year, a new Medicare item will be offered for services provided by a psychologist.
As part of the package, an extra 900 personal helpers will help the mentally ill live in the community, and there will be more accommodation places for mentally ill people also fighting a drug or alcohol addiction.
There will be 650 new respite places created to help carers, with priority given to elderly parents looking after severely disabled adult children.
The respite places will include overnight and day services and will help up to 15,000 families a year.
Mr Howard said while the new Medicare item would be costly, it was something that was needed. "It's one of the huge gaps," he said.
"This is a huge breakthrough to establish this new Medicare item - a massive breakthrough - and it's one of the things that's needed to dramatise our determination to deal with the problem."
But Mr Howard warned the crisis in mental health would not be fixed without the help of the states. "These are areas where the public is sick and tired of any buck passing," he said.
"We will do these things whether or not the states respond but I do believe they will respond." Mr Howard said the states must devote funding to the area of accommodation for the mentally ill.
The funding boost comes less than a week after a Senate report found the mental health sector desperately needed a "substantial" funding boost, following years of neglect.
The report, released on Thursday, made 13 recommendations for sweeping changes, calling for spending on mental health to at least double in the next five years.