Seven-time world champion Hamilton lasted 15 laps at Albert Park before rolling to halt with a power unit failure, while Russell took a skid into gravel at turn six before smashing into a barrier at the end of the race.
It was the first double DNF for Mercedes since Hamilton and Valtteri Bottas retired with technical troubles at the 2018 Austrian Grand Prix.
With zero points taken in a race won by Ferrari's Carlos Sainz, Mercedes have now slumped to fifth in the constructors' championship behind leaders Red Bull, Ferrari, McLaren and Aston Martin.
"Tough to take, super tough," downcast team boss Toto Wolff told reporters.
"And I would be lying if I could say I feel positive about the situation and optimistic but you just need to overcome the nagging, negative thoughts and say, 'we will turn this around'.
"But today it feels very, very brutal."
Hamilton, who won six of his world titles with Mercedes, will join Ferrari in 2025 and may be counting down the days until his exit.
With only eight points from the first three races, the Briton has never had a worse start to an F1 season.
Hamilton's setback on Sunday came a day after qualifying 11th, his worst at Albert Park since 2010.
He did his best to put on a brave face, saying things could be worse, but admitted the struggles of Mercedes' W15 car were tough on the spirit.
"I think for everyone in the team, when so much work is going on throughout the winter for everybody, you come in excited, motivated and driven, and then you’re with the mindset that you’re going to be fighting for wins," he added.
"And then obviously that’s not the case. And then you’re like, 'OK, maybe second, third'. No, it’s not the case, and it cascades a bit further down. And you just go through the motions. It’s challenging."
The Mercedes cars ran hot and cold through the weekend, with handling problems, bouncing and trouble at high-speed corners.
Wolff said the performance problems were still mystifying for the team.
"We've got to really dig deep," he added.
