The first Abbott government budget will include cuts to public spending, a hike in income tax for high earners and a petrol tax rise.
Treasurer Joe Hockey will ask all Australians to help with the repair job when he delivers his first budget on Tuesday.
The budget is expected to forecast a deficit of about $30 billion for 2014/15, but pave the road back to surplus through public sector spending cuts, tightening of the welfare and dole system, the reintroduction of petrol excise indexation and an income tax rise for higher earners.
Parliamentarians and the most senior-ranked public servants will also receive a one-year pay freeze, after a Remuneration Tribunal ruling on Monday.
Mr Hockey said it was an important night for Australia.
“The budget will ask all Australians to contribute so that we can build a stronger and more prosperous nation,” he said in a video statement.
The government will also argue the abolition of the carbon and mining taxes, as well as delivering on some of Labor’s unlegislated tax changes, will bring down the overall tax burden.
On the eve of the budget, Labor seized on reports that the Medicare Locals system could be scrapped – despite the coalition’s pre-election pledge not to cut health.
Opposition Leader Bill Shorten would not rule out blocking some unfair budget measures.
“Broken promises should not be rewarded,” he said.
The Medicare Locals speculation was sparked by the release of a review by Professor John Horvath of the 61 offices which found “inconsistent outcomes … and poor network cohesion”.
Health Minister Peter Dutton said Labor started the program with little planning and forethought.
“This government is committed to reducing bureaucracy and red tape while delivering resources to frontline services,” he said.
In deciding on a pay freeze for MPs and senior public servants, the Remuneration Tribunal on Monday said they should lead by example as the federal budget is tightened.
But the tribunal described the decision as a temporary pause to be reviewed later.
Almost 80 government entities are set to be merged or abolished, saving $470 million over four years.
The Royal Australian Mint, Defence Housing Australia and Australian Hearing will be sized up for sale, after Medibank Private is put on the market.
“Government has become way too big and way too wasteful,” Finance Minister Mathias Cormann said.
As many as 16,000 public sector jobs will go – about 4000 more than initially promised at the election.
ACTU president Ged Kearney questioned the motive behind plans to streamline the public service.
“It really is a government that is ideologically driven to shrinking the size of government,” she told reporters in Canberra.
The budget will include an $82 billion infrastructure program to drive jobs growth as mining sector investment eases.
Labor transport spokesman Anthony Albanese said it would be a series of “re-announcements” of projects begun by the previous government.
Much attention will focus on how the government fulfils its pre-election promise to honour the Gonski school funding.
Ken Boston, a member of the Gonski review panel, said the coalition made a very clear promise to boost school resources.
“If it doesn’t deliver on that then it will entrench the current deplorable situation which sees our education performance diminishing in relation to other countries.”