Treasurer Jim Chalmers says inflation is a dragon that needs to be slayed, as rocketing power bills and dipping real wages heap pressure on Australians.
Addressing the National Press Club after delivering his first budget on Wednesday, Dr Chalmers said Labor felt for those doing it tough but had to be careful not to add extra inflationary pressure with any cost of living relief.
Households are looking at a spike in prices, with electricity bills forecast to rise an average of 20 per cent this year and 30 per cent in 2023/24.
Gas prices could jump 20 per cent both this financial year and next, according to Treasury.
Wages growth isn't expected to outstrip inflation until at least mid-2024 and the government said measures like child care and paid parental leave will help some families struggling with some cost of living issues.
Dr Chalmers said balancing support measures with the extraordinary level of inflation was a tough act.
"That temptation becomes a lot stronger when you see people hurting ... as a Labor government, as Labor people, we feel that, we care about that, it keeps us awake," he said.
"Whether it's food, whether it's electricity, whether it's rent, inflation is public enemy number one, inflation is the dragon we need to slay."
While the budget papers point to a better-than-expected deficit for 2022/23 of $36.9b, it is on track to blow out to $51.3b in 2024/25.
The economy is forecast to grow 3.25 per cent this financial year but growth will slow sharply to 1.5 per cent in the next financial year.
The treasurer said while there was a rise to GDP expected, fiscal issues lay ahead.
"While the economy is growing, the challenges facing the economy are growing as well," he told parliament.
"The budget that we handed down ... was framed against the backdrop of serious deterioration in the global economy, global energy and price shocks in particular."
Prime Minister Anthony Albanese rejected suggestions the government didn't take tough decisions in its first budget after banking almost all of the recent extra revenue driven by higher commodity prices.
"When you've got all this global uncertainty right around the world, your best defence is a good, solid, responsible, sensible budget at home," he told parliament.
"But the budget does more than batten down the hatches against global uncertainty. It also begins to back in families and to build a better future for this country."
But NSW Treasurer Matt Kean said more money needed to be given back to the community because the budget was propped up by soaring coal and gas prices.
"I'm asking them to return some of that to struggling households," he told ABC radio.
Dr Chalmers said the government would consider regulatory steps to ease power prices while acknowledging global factors like the war in Ukraine were adding to the pressure.
"Budgets at their best bring together the global and the local - and on this occasion there is almost no distinction between the two things," he said.
Opposition Leader Peter Dutton, who will deliver his budget reply speech on Thursday, said the government had broken its election promise to make Australians better off.
He said a typical family would be $2000 worse off by Christmas with inflation, the tax burden, power prices and unemployment all expected to rise under Labor.
Mr Albanese said the budget had focused on "responsible" cost of living support.
