Senior Labor MP Joel Fitzgibbon has broken ranks to call on the Government to "give up" on its promise to deliver a budget surplus next year.
Treasurer Wayne Swan promised a surplus in the May budget forecast and reaffirmed that commitment in his mid-year update.
Prime Minister Julia Gillard last week re-affirmed the pledge, despite lower-than-expected GDP growth in September and the Reserve Bank cutting interest rates.
But Mr Fitzgibbon, who is chief Government whip and a right faction playmaker, has revealed he disagrees with the plan.
He told Sky News the public will "understand things are still bad in the international market place".
"I think it's time and I think people will understand to give up the surplus commitment and do some good things on the productivity front with that extra money," he said.
He said there are senior economists who are backing a budget deficit.
"We've got monetary and fiscal budget policy running in different directions," he said.
"There's good reason to run a budget deficit in times of need.
Many senior business people are now supporting the case for allowing the budget to creep into deficit.
"I think it would be very easy to sell and it would be a good thing for the economy." Labor's parliamentary secretary Mark Dreyfus says Mr Fitzgibbon's comments do not signal a change in Labor policy.
"Mr Fitzgibbon is entitled to express any opinion he wishes but the Government's position, the Government to which I'm part of, is absolutely clear and that is that we are returning the budget to surplus," he said.
But Mr Fitzgibbon said "many in the caucus" would back his stance, adding that Labor has been "spooked" by the Opposition over the budget.
Earlier this month left faction convenor Doug Cameron said he did not want the Government to develop a surplus fetish.
He said the Government should choose to go into deficit if jobs are in trouble.
The Government forecast a surplus of $1.1 billion for 2012-13 in its most recent budget update released in October, which was down from the $1.5 billion predicted in May.
Since then, it has emerged that the mining tax did not raise any revenue in its first three months of operation.
Following the release of the national accounts figures last week, Mr Swan conceded that falling government revenue would make it harder to deliver the surplus.
The Opposition has promised to deliver a budget surplus in its first year of Government should it win the next election.
ABC News asked users on Twitter about what they thought of Mr Fitzgibbon's comments: