GDP has fallen by 1.2 per cent, a greater amount than many economists expected.
The Australian dollar rose almost half a US cent following the news.
This came after an upwardly revised 0.8 per cent rise in the December quarter.
It is the worst quarterly result since March 1991, with the hit on exports - largely a result of devastating floods - partly blamed for the slump.
The last time GDP contracted was in the December quarter of 2008, at the height of the global financial crisis.
Over the year to the end of March, GDP grew by 1.0 per cent, seasonally adjusted in chain volume terms, the Australian Bureau of Statistics (ABS) said.
Economists had been expecting a sizeable fall in the quarter.
Early this week, the median market forecast was for GDP contraction of 0.4 per cent in the March quarter, for an annual expansion of 1.7 per cent in the year to the end of March, according to an AAP survey of 13 economists.
The survey was conducted on Monday, however most economists subsequently revised down their GDP forecasts on Tuesday, after the ABS reported a large fall in exports in the quarter, thanks largely to the impact of flooding on Queensland's coal mines.
Household final consumption expenditure rose 0.6 per cent in the quarter and was up 3.4 per cent over the year to March, adjusted.
Total investment in dwellings rose 4.6 per cent in the quarter, adjusted, to be up 6.6 per cent in the year to March.
Total gross fixed capital formation rose 2.4 per cent in the quarter and was up 2.4 per cent over the year, adjusted.
Domestic final demand rose 1.3 per cent in the quarter and was up 3.3 per cent over the year, adjusted.
Federal Treasurer Wayne Swan will hold a media conference in Canberra to discuss the March quarter national accounts at 12.20pm (AEST
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