Treasurer Joe Hockey has declined to deny independent analysis indicating a $51 billion hole in his budget, blaming tumbling iron ore prices for putting pressure on the bottom line.
Speaking on Adelaide radio station 5AA on Tuesday, Mr Hockey was also keen to keep consumer sentiment buoyant before Christmas, ruling out any immediate savage cuts to the budget in a bid to tackle the widening deficit.
The Treasurer has put Labor on notice saying the opposition will need to eventually help the government address the deficit, if it is serious about restoring the budget to surplus.
"Iron ore prices are between 30-40 per cent less than they were when we first made our forecasts in the budget, that has a direct impact on our budget bottom line, there is no doubt about that," Mr Hockey said.
The iron ore spot price has fallen from $138 US per tonne in November 2013 and was valued at $75 US per tonne as of last week, according to Bloomberg data. But the Treasurer was keen to reassure businesses of the government's intent to forgo cuts before Christmas.
"I am very focused on maintaining economic momentum in Australia in the Christmas period and beyond [so] we are not going to turn our mid-year budget into a mini-budget, we are not going to go down the path of trying to make up lost ground immediately," he said.
ANZ's weekly survey of consumer sentiment conducted by Roy Morgan recorded a 0.2 per cent increase in consumer sentiment.
Chief economist Warren Hogan said confidence in the economic outlook remained subdued.
"While it is encouraging that consumer confidence is now trending higher, the pace of improvement is slightly disappointing," Mr Hogan said.
He said worsening unemployment and job losses in the aviation and manufacturing sectors combined with the already announced federal budget cuts were contibuting to cosumer's unease.
Mr Hockey sought to put pressure on Labor over the deficit saying: "Sooner or later the Labor party needs to understand that they can't keep whingeing about spending more money, whilst we fail to get the revenue that was anticipated from iron ore exports and coal exports months and a year ago.".
But Labor's Treasury spokesman Chris Bowen said the opposition would not back the government's "unfair budget" because it was "fundamentally bad for the economy".
And Mr Bowen said Mr Hockey's warning about diminishing revenues flew in the face of his previous claims in opposition that Australia did not have a revenue problem and accused the Treasurer of abandoning his May budget.
"This is a complete and humilating back down for the Treasurer," Mr Bowen told Fairfax Media on Tuesday.
"As world leaders fly into Australia for the G20, they are witnessing the Abbott government's first budget completely unravelling."
Mr Bowen urged Mr Hockey to "bite the bullett" and reveal the budget's true state at the "earliest opportunity".
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