Budget 2014: Joe Hockey ready to hand down tough budget, to reveal $60 billion debt over four years

Treasurer Joe Hockey is preparing to hand down the Abbott Government's first budget, which will reveal a reduction in the deficit from $123 billion to $60 billion over four years.

The Budget is expected to include widespread spending cuts alongside billions of dollars for road building and other infrastructure projects.

The Coalition will also announce the creation of a Medical Research Future Fund to be worth $20 billion by 2020, to be paid for by savings in the health portfolio.

Budget jargon-buster: What the big words really mean

A $10,000 incentive will be offered for employers who hire workers aged 50 and over who have been on income support.

But a GP co-payment, hikes to fuel excise and to personal income taxes for high-income earners are also expected to be revealed by the Treasurer in his speech at 7.30pm (AEST).

'A watershed moment'

This Federal Budget will be a "watershed moment" in Australian history, Tony Abbott has told his coalition team.

The Prime Minister has assured his Liberal and National MPs and senators that the government has not "squibbed" the budget task.

"This is a watershed moment, when a bold new government does what has to be done to set the nation on a better course," he said.

Mr Abbott said the public will respect the government for the budget, even if there are parts of it people don't like.

"This is the right budget for our country. It is carefully crafted to do the right thing to our country, and to be fair."

The prime minister said Peter Costello's 1996 budget was the last hard budget - but this one has even more major reforms.

Tony Abbott thinks people don't need public transport. That's why he's cutting all funding for it tonight #Budget2014 pic.twitter.com/fGSdRZ3R2c

— Anthony Albanese (@AlboMP) May 13, 2014

Several MPs raised concerns about pre-budget leaks over the last few weeks but Mr Abbott told them the end product was the most important thing.

While many of the flagged policies have proven to be unpopular, with support for the coalition tumbling substantially over previous weeks, Mr Abbott has remained firm.

He hosted new Coalition MPs at a Parliament House dinner last night, where a spokesman said the message was one of "love and reassurance" as he explained the budget measures to them.

The spokesman said the PM assured "them that by the time they get to the next election, there will be a positive story to tell".

"Yes, there's got to be short-term pain, but it's pain with a purpose," he told Macquarie Radio.

"This is a problem-solving budget because we do have a very serious problem of debt and deficit, stretching as far as the eye can see. But it's also a nation-building budget," he said.

"I'm going to be able to look people in the eye on Tuesday night and on Wednesday morning and beyond and say we are all in this together, we are all doing our bit, we are all playing our part," he said last week.

Fully-prepared for criticism: Hockey

Tax hikes and massive spending cuts are on the Budget agenda, and no less than 70 government agencies – and 16,000 public service jobs – on the chopping block.

The ballooning national debt, which according to Mr Hockey will total $123 billion over the next four years, is the driving force behind the dramatic cuts.

Mr Hockey said he is fully prepared to be criticised for the Budget, but he believes it will help shape Australia's destiny.

The Budget is expected to include a co-payment when visiting the doctor, a temporary levy on high income earners, a future rise in the pension age to 70, the reintroduction of indexation on fuel excise and big cuts to the public service.

"If you are only looking in the budget for your own interest then you may be disappointed," Mr Hockey told reporters in the traditional pre-budget walk-in to parliament house.

But if you are looking for the national interest, you'll be cheered."

The Budget will include an economic growth package with innovative workforce participation measures that will help create the jobs that are so necessary, Mr Hockey said.

Live coverage: Follow our Budget live blog from 6:30 pm tonight

Hikes to fuel excise and to personal income taxes for high-income earners are also expected.

"The budget needs to be fixed, we didn't create the mess but we are stepping up to the plate to fix it and we will take responsibility to fix it."

"Don't assume there are broken promises. The most significant promise we made was to fix the budget, to build a strong economy, and tonight we're getting on with the job."

 

A quick word from the Treasurer about tomorrow night’s Budget: http://t.co/oQdSYT22zW #auspol #Budget2014

— Liberal Party (@LiberalAus) May 12, 2014

A salary freeze for politicians has been raised, but ordinary Australians may find themselves taking on much of the burden. Here's what you can expect from the Budget.

Deficit levy

Support for the coalition has dived over the proposed tax on high earners, which was initially set to hit Australians earning over $80,000 a year with a 1 per cent levy. It is now expected to be a 2 per cent hike imposed on incomes over $180,000.

The so-called deficit levy may be the most controversial point on the Budget slate, with many voters lambasting it as a betrayal: Tony Abbott's campaign promised that no new taxes would be introduced under his government.

Related: Road package a sham, says Labor

Greens to oppose deficit levy and offer permanent taxes on wealthy - http://t.co/xOEu0F5GtH #auspol #Budget2014

— Jack Gough (@jgough87) May 12, 2014

Fuel excise

The fuel excise, which was frozen in 2001 at 38.14 cents per litre, is also set to be raised tomorrow. It hasn't yet been revealed how the indexation will be changed, but experts speculate that the move could cost motorists more than $1 billion a year.

The Australian Automobile Association has hit out at what it calls a "back-door carbon tax", while Queensland Liberal National MP Ken O'Dowd told the ABC that it would drive up the costs of everyday goods.

Welfare cuts

Radical changes to the welfare system have been flagged, and families, pensioners and low-income earners fear that they may be hit particularly hard.

Expert opinion: Brain audit needed for Budgeteers

Australians under 35 claiming a disability pension will reportedly be reassessed for their fitness to work, and a government-commissioned review led by billionaire miner Andrew Forrest has recommended that teenagers be stripped of welfare benefits.

Tough governments make tough decisions & that's what we elected this government to do. Not to panda to simple & popular options #Budget2014

— Sandra (@San123_1) May 12, 2014

Family Tax Benefit B is facing the axe, while tighter means testing will also be introduced for Family Tax Benefit A.

The retirement age will be raised to 70, and age pension increases are on the chopping block. A massive cut to $10 billion in business aid has also been raised.

Health

The Budget is expected to introduce a co-payment of $6-$7 for bulk-billed GP visits, although the Commission of Audit recommended a much higher fee of $15. The latest polls show that a $6 fee would stop almost four in 10 people from visiting their doctor.

Employment

Treasurer Joe Hockey has taken a lot of heat for the proposed spending cuts, but he says the Budget will also introduce massive infrastructure plans to boost jobs, as unemployment continues to hover at 5.8 per cent.

Mr Hockey says a six-year, $80 billion road building plan will create tens of thousands of jobs and prevent unemployment hitting the 6.25 per cent rate predicted by the previous Labor government.

Labor has slammed the roads package as "a sham", claiming that new spend by the Government is unlikely to surpass $2 billion.

Beating the budget: is there anything you can do?

The outlook may seem bleak, but it's not all bad: Yahoo7 Finance and Seven's Finance expert Scott Pape have worked out practical ways to limit the hip-pocket pain the budget is likely to cause.

1. Call your bank

If your home loan is with the big four banks, you've likely been paying a standard variable rate of 5.2 per cent. Seven Finance expert Scott Pape, however, has found 40 home loans under 5 per cent currently on the market. He recommends quoting a realistic rate of 4.88 per cent to your bank, and asking them to match it or leave.

Savings: On a $400,000 loan, you can save $936 a year.

2. Call your insurer

The dirty little secret of the insurance industry is that it takes $150 in advertising costs to target a new customer.

That's why most insurers offer sweeteners to the tune of $100 to get you to switch. Pape recommends calling your insurer and asking them to lower your bill by $100 to keep your business.

Savings: "I've seen families save over $400 with just this one phone call," says Pape.

3. Limit the hit to family finances

While it's not possible to completely avoid the hit from welfare cuts, it's worth checking out your household bills to ensure you aren't spending more than you need to be. Here are a few tips for being smart with your savings.

For a more extreme take on cost-cutting, check out this coupon queen saves thousands of dollars a month.

Also check out the top ways that Australians waste money.

4. Avoid fuel price shock

The nasty return of the petrol excise is set to burn a hole in your pocket. Minimise the impact by shopping around for fuel: prices are significantly lower in some suburbs.

5. Examine your private health cover

While there isn't a lot that can be done about the expected Medicare co-payments, you should definitely check your private health cover to ensure that it's leak-proof and you're not wasting money.