Scott Morrison has described Australia's first recession in 29 years as a heartache for the country.
The economy shrank 0.3 per cent in the March quarter due to the bushfires and early stages of coronavirus lockdowns, and a much larger fall is expected in the current June quarter.
"I really didn't want to see a recession ever again in Australia," the prime minister told reporters on Thursday.
"As a government we worked so hard to bring the budget back into balance ... to see COVID-19 hit it like a torpedo is absolutely devastating.
"Where we find ourselves now is heartbreaking."
Mr Morrison said the economic fallout could have been much worse, were it not for his government's response to the pandemic.
He said Australia was making its way back from the coronavirus crisis with the help of a $688 million home builder scheme.
"It's going to be a hard road back," Mr Morrison said.
The income-capped construction scheme will offer grants of $25,000 to people who want to renovate their home or build a new one before the end of the year.
Labor has criticised the government for overlooking social housing.
It is also keen to point out the government had previously claimed the budget would be back in black, describing the premature boast as humiliating.
Treasurer Josh Frydenberg will deliver an economic update in July, a month later than planned.
Opposition Leader Anthony Albanese has accused the government of delaying the financial statement because of the Eden-Monaro by-election.
Mr Frydenberg will also announce changes to the JobKeeper wage subsidy scheme.
Unions and business say the recession shows the need for government support beyond the six months envisioned when the coronavirus pandemic hit.
ACTU president Michele O'Neil said the government needed a comprehensive plan to create jobs and lift Australia out of doldrums.
The union movement has proposed an eight-point plan which includes lifting wages and living standards, investing in public and community services, infrastructure spending and investment in education and training.
"The uncertainty created by the government's refusal to both broaden who is receiving JobKeeper today and extend its life beyond September is causing additional hardship and reducing consumer confidence," she said.
Ai Group chief Innes Willox said the growth figure showed governments were playing an important role in countering the downturn, but more was needed.
"The further support set to flow over the next few months will reinforce a rebound in activity and reduce but likely not eliminate the need for additional measures after JobKeeper ends in September," he said.
Shadow treasurer Jim Chalmers said the economic slowdown had been coming before the virus hit, but had been made worse by the necessary shutdowns to reduce the spread.
"Having introduced the support for the economy too narrowly and too slowly, Australians can't afford the government to withdraw that support too quickly or too bluntly," he said.
Australian Associated Press