Scott Morrison cut short his Hawaii vacation with his wife and adult children following a public outcry over his absence back home during a national crisis.
Since September, the devastating blazes have killed at least nine people, including two firefighters, destroyed more than 800 homes and burned three million hectares of land (7.4 million acres).
Mr Morrison returned on Saturday, two days after a week-long state of emergency was declared in New South Wales for the first time since 2013.
Speaking during a news conference at the state’s rural fire service headquarters in Sydney, Mr Morrison said with the “benefit of hindsight we would have made different decisions”.
He said: “I get it that people would have been upset to know that I was holidaying with my family while their families were under great stress.
“But I’m comforted by the fact that Australians would like me to be here, just simply so I can be here, alongside them as they’re going through this terrible time… and I apologise for that.”
Mr Morrison said by going on holiday he was trying to keep a promise to his children, but said that he accepted as prime minister “you have other responsibilities”.
“I accept that. I accept the criticism,” he said.
As more than 100 fires burned across New South Wales, including the out-of-control Green Wattle Creek fire in southwest Sydney, Mr Morrison joined state leader Gladys Berejiklian on a visit to the Wollondilly emergency fire control centre.
They announced an extra $3.5m (ÂŁ1.8m) in disaster relief funding for fire-affected communities.
Ms Berejiklian confirmed the small community of Balmoral about 75 miles from Sydney had been almost totally destroyed.
She said: “We’ve got the devastating news that there is not very much left of the town of Balmoral. Very sad to hear that.”
The town is home to 400 people, with an estimated 150 houses.
In Balmoral, a potter whose property was engulfed in a “big plume of black smoke” survived by hiding in a makeshift kiln.
Steve Harrison stayed in there for half an hour while the “firestorm went over”.
“I was terrified,” he said, his voice shaking with emotion.
Climate change has been cited as a major factor in fires burning across New South Wales, Victoria and South Australia during a record-breaking heatwave.
Mr Morrison acknowledged a link between climate change and bushfires, but said it was “not credible” to directly link specific fires to the issue.
He said: “There is no argument, in my view, or the view of the government, and any government in the country, about the links between broader issues of global climate change and weather events around the world.
“But I’m sure people would equally acknowledge the direct connection to any single fire event is not a credible suggestion.”
Opposition leader Anthony Albanese said it was “a good thing” Mr Morrison was back in Australia “but we saw today no change in his strategy with regard to the bushfires”.
“We’ve seen no change to climate change policy and we’ve seen no commitment to provide compensation to our volunteer firefighters who are giving up working and the wages that come from that in order to help their communities.”
Earlier this month, Australia – one of the world’s largest carbon emitters per capita due to its reliance on coal – was criticised at a UN climate change summit for its policy of using old carbon credits to count towards future emissions targets.
Conditions eased in some areas on Sunday after it turned cooler, but the hotter conditions are expected to return.