Australia's first recession in 29 years is shaping up to be shallower than economists first thought and could leave the September and December quarters in positive territory despite Melbourne's lockdown and a looming $73 billion fiscal cliff.

Key partial GDP data including construction and business investment over the last few days indicates that while the COVID-19 economic hit in the June quarter will be the biggest on record, it will less severe than many forecast, supporting the view of the Reserve Bank and Treasury.