The federal government has lowered its forecast for growth and will make $16.4 billion in new savings over four years to return the budget to surplus.
Treasurer Wayne Swan on Monday released an update to the May 2012/13 budget, laying out changes to the baby bonus and the way big companies pay tax as well as further reforms to private health insurance.
Mr Swan said while Australia's economic fundamentals remain strong, worsening global conditions have cut almost $22 billion from tax receipts over the forward estimates and $4 billion alone in 2012/13.
"The weaker global outlook and lower than expected commodity prices, along with the general easing of price pressures in the economy, are again slowing the recovery in tax revenue," Mr Swan said in a statement.
The domestic growth forecast has been cut since the May budget.
Real gross domestic product (GDP) is now forecast to grow at around trend at three per cent in 2012/13 and 2013/14.
This is a downgrade of one quarter of percentage point since the May budget.
Australia's terms of trade is also forecast to worsen, declining by eight per cent this financial year compared to a previous forecast fall of 5.75 per cent.
But unemployment rate is expected to remain low at 5.5 per cent in 2012/13 and 2013/14, while inflation is likely to remain well contained.
"The government has responded to the more challenging global outlook by delivering $16.4 billion in new savings over the forward estimates," Mr Swan said.
"These savings strike the right balance, minimising any impact on the economy and on the community's most vulnerable, while still maintaining strong public finances."
The government has cut its forecast surplus for this financial year to $1.1 billion, from $1.5 billion.
But it has raised the surplus for 2013/14 to $2.2 billion, from $2 billion.
As part of its savings measures, private health insurance (PHI) rebate costs will be reformed further.
From April 1 2014, the premium to which the rebate is applied will move in line with the consumer price index, or the commercial premium increase, whichever is lower.
The rebate as it currently applies will remain unchanged.
Mr Swan said this will save about $700 million over the forward estimates and ensure the rebate remains on a sustainable footing.
Further long-term savings include changes to the Baby Bonus and removal of concessional treatment for 'in-house' fringe benefits accessed through a salary sacrifice arrangement.
There will also be changes to the way large companies pay their tax, moving from quarterly to monthly instalments.
The government said this will better align tax payments with the way businesses pay GST and make payments closer to when the income is earned, like wage and salary earners.
Mr Swan said because of the government's fiscal discipline, government payments as a share of the economy were projected to fall by 1.5 per cent in 2012/13 to 23.8 per cent.
"It is estimated that payments as a share of GDP will remain relatively stable over the forward estimates," he said.
"This is the longest period in which payments will remain at 24 per cent or less as a share of GDP in over 30 years."
Meanwhile, the government is still counting on the economy to continue to be underpinned by a surge in investment in the resources sector.
It also expects strong growth in commodity exports and solid household demand.
"Household consumption remains solid in aggregate and there are tentative signs that residential building activity may be starting to improve," the budget update said.
The key risks to Australia's economic outlook include a further escalation in the financial woes in Europe, a stalled US recovery and less than sustainable growth in China.
"Still, with a low unemployment rate, solid GDP growth, a strong financial sector, room to manoeuvre on monetary policy and strong public finances, Australia is well-placed to manage the effects of any further deterioration in the global economy," the update said.