Jim Chalmers has laid the groundwork for future belt tightening in his first federal budget, while outlining cost of living help and extra spending on health and housing.
The Labor treasurer said Tuesday's budget was "right for the times," but warned of hard decisions ahead for fiscal repair, as inflation and interest rates increase.
Cost of living measures were a centrepiece of the 2022/23 budget, with Dr Chalmers saying targeted initiatives were needed in order to avoid further inflationary pressures on household budgets.
The government will also deliver on key election promises such as a national anti-corruption commission and aged care reform, along with funding boosts to core spending areas such as Medicare and the NDIS.
Child care will be made cheaper for 1.26 million people, which is set to cost $4.7 billion over the next four years, while more than $530 million will be spent expanding paid parental leave to 26 weeks by 2026.
An extra $787.1 million has also been set aside to reduce co-payments for the Pharmaceutical Benefits Scheme, while money has been allocated to support pay rises for low-paid workers.
While the underlying cash deficit of $36.9 billion for this financial year is more than $41 billion better than expected, the deficit is on track to rise to $51.3 billion in 2024/25.
The economy is forecast to grow by 3.25 per cent during 2022/23, but will ease to just 1.5 per cent growth the following financial year.
Inflation has been tipped to peak at 7.75 per cent in the December quarter before easing over the next two years.
Dr Chalmers warned bigger spending pressures on the budget were only set to increase.
"In the longer term, there's a bigger job to do, to put the budget on a more sustainable path," he said.
"This is just the beginning of our budget repair work, and it's just the beginning of the conversation we need to have as a country."
Household budgets are also expected to take a further hit, with Treasury assuming retail electricity prices are set to rise by 50 per cent over the next two years.
The budget papers said the higher electricity prices would have an indirect impact on inflation.
Dr Chalmers told the ABC the government would consider regulatory steps to ease power prices.
"This pressure is coming from a busted energy market around the world, a consequence of the war in Ukraine," he said.
"But the consequences of that are being borne around the kitchen table. And we won't ignore that."
The government has identified more than $28 billion of savings to be made over the next four years in what will be the start of budget repair work.
Dr Chalmers said there needed to be a "premium on restraint" in order to give the budget a buffer in the event of further economic downturn.
Despite the pressures, the budget delivered on a number of key Labor election promises.
A national housing accord has set a target of one million new homes to be built over the next five years, with $350 million set aside for social housing.
The NDIS will also be boosted by an extra $8.8 billion over the next four years, while $235 million will be spent on urgent care clinics and $750 million to strengthen Medicare.
Business Council of Australia chief executive Jennifer Westacott said the budget set the groundwork for economic reform.
"This is a crucial first step to restoring our budget position and building our national resilience," she said.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar described the budget as responsible, but warned against complacency.
"Whilst this budget takes a first step towards fiscal repair, long-term challenges remain considerable," he said.
Union boss Michele O'Neil praised the budget for tackling the cost-of-living crisis.
