Veterans' Affairs Minister Matt Keogh says his apology was important because many veterans and their families have been treated inappropriately and not listened to.
The minister issued the apology in parliament on Monday when releasing the government's response to a set of interim recommendations from the royal commission into veteran suicide.
He described the rate of veteran suicide in Australia - which is higher than that across the general population - as a "national tragedy".
The interim royal commission report was handed down in August, finding the entire system for serving and ex-serving defence personnel "needs to be reimagined and re-engineered" due to how complicated it is.
The government said it would agree to recommendations from the interim report, which includes a simplification and harmonisation of veteran compensation, as well as closing the backlog of veteran compensation claims.
Mr Keogh told ABC radio on Tuesday the apology was important.
"Part of the issue that veterans and serving personnel and their families, especially the loved ones of those who have taken their own life, have been grappling with is being heard and feeling like they're being heard," he said.
They also wanted an acknowledgement that agencies had sometimes operated inappropriately, he said.
The royal commission told the government it should aim to get through a backlog of claims by March 2024.
Mr Keogh said with extra staffing it should be achieved by the end of 2023.
"It's a really difficult situation. It's why we have taken on doing this triage processing and trying to prioritise those claims where people are most at risk or families are most at risk."
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