As a result, he said the state would no longer be accepting any global arrivals "for the foreseeable future".
Australia will halve the number of global arrivals to the country and conduct an inquiry into the hotel quarantine system following the surge in coronavirus cases in Melbourne.
Prime Minister Scott Morrison announced the changes after a national cabinet meeting with state and territory leaders on Friday.
Since worldwide borders were closed in mid-March, more than 357,000 Australian citizens and permanent residents have returned amid the global coronavirus pandemic.
Morrison said the number of flights "will be cut by just over half across all the various ports" that are receiving Australian citizens and residents returning home. Once they arrive, they enter a mandatory 14-day quarantine in hotels, which is paid for by state governments.
"There is also a view across the national cabinet that they are all effectively moving to a charging system for the hotel quarantine that is in place for those returning [passengers]", he said.
Neighboring New Zealand enacted measures earlier this week to limit the number of citizens returning home to reduce the burden on its overflowing quarantine facilities.
"It was always going to get worse before it got better", said Daniel Andrews, the premier of the state of Victoria which includes Melbourne.
National cabinet met to consider the worsening second-wave outbreak, which has seen the reimposition of stage-three lockdowns in Melbourne and isolated Victoria with border bans imposed by every state and territory.
He said the move was needed to focus resources on countering the "very concerning" virus surge in Melbourne, where authorities reported a record 288 new cases of Covid-19 in the past 24 hours.
Victoria on Friday became the first state to recommend its residents wear masks.
"I apologize for it because this is nowhere where any Victorian wanted to be, but it is the reality of the situation that we confront", Pallas said.
Despite surging numbers of cases in Victoria, the state has relaxed restrictions on most of the 3,000 people who were locked down in nine public-housing towers.
Melbourne's five million residents were ordered back into lockdown yesterday amid fears the city's outbreak could spread elsewhere. One of the nine towers will remain in a hard lockdown for another eight days.
Even with the latest outbreak, Australia has done relatively well in controlling the novel coronavirus so far, with around 9,000 cases and 106 deaths.