Means-tested $25,000 HomeBuilder Grant to boost economy an estimated $15 billion

Australians will be offered $25,000 grants to build a new home or start a major renovation under a new $688 million federal government housing package.

The government announced the rort-free HomeBuilder program on Thursday after new figures revealed the country dipped into a recession for the first time in three decades.

An estimated $15 billion boost to economic activity will be delivered under the $688m Home Builder stimulus package with the plan restricted to people on middle incomes and to new homes and major renovations valued between $150,000 to $750,000.

The pre-renovation value of the house must not exceed $1.5 million and excludes sheds, pools, granny flats and any other structures not attached to the property.

The $1.5 million cap will exclude many inner Melbourne and Sydney homes as the median house price for each city sits at $918,350 and $1,168,806, respectively, according to Domain figures.

Prime Minister Scott Morrison said the scheme would drive a "tradie-led recovery" of the economy, and would support 140,000 direct construction jobs and a million workers in the wider residential building sector.

The temporary scheme that will last until the end of the year, aiming to build 30,000 homes by Christmas.

Construction of a new home or a substantial renovation must be contracted to begin within three months to prevent a rise in house prices.

Those eligible are singles who earned up to $125,000 the previous financial year and couples who earned up to $200,000.

The scheme will work along existing state and territory first-home owner grants programs, stamp duty concessions and other grant schemes, including the federal government’s first-home loan deposit scheme and first-home super saver scheme.

Treasurer Josh Frydenberg said the package aimed to spark jobs and stimulus for the economy.