Labor's federal budget, to be delivered Tuesday, will deliver a surplus for 2012-13, but the size of the surplus has been dampened to preserve funding for pensioners and families hurt by rising living costs partly to equip Labor lawmakers with tools to sell the budget to Australians, according to a report by The Australian.
Treasurer Wayne Swan has said that Labor will deliver on its prediction of a $1.5 billion surplus in 2012-13, which it forecast in the mid-year update in November. But Labor has reportedly factored in a series of means-tested, one-off payments for welfare recipients and lower-paid workers which would come on top of cash payments for parents of school-age children announced over the weekend.
The measure is likely to attract heat from the opposition, who have criticised Labor for instituting major spending cuts while also proposing significant one-time handouts designed primarily to garner political support.
Whether or not such measures backfire could be crucial to Prime Minister Julia Gillard's post-budget political life. Her ability to sell the budget both within her party and broadly among Australians could determine her future as prime minister and leader of the Labor Party.
Mr Swan has promised a "fair-go" budget for 2012/13, but the opposition believes it will be one of "spin" and fudged numbers because of the spending cuts needed to build a surplus.
More: Swan set to deliver 'fair-go' budget
Ms Gillard has declared Labor will "conquer" the political pressure it is under and the promised surplus will be an important buffer against global uncertainty.
She told the Labor caucus on Monday that "Labor reforms" - including the National Disability Insurance Scheme, an aged-care overhaul and support for school-aged children - as well as the carbon pricing compensation, would give members plenty to talk about in their electorates.
Opposition Leader Tony Abbott told his shadow cabinet that while Mr Swan would trumpet a budget surplus, it would be a surplus based on "fiddled figures".
"Whether it will be the things that have been moved from next year into this year, whether it's the things that are moved off the budget that should be on the budget, it will be a cooked books surplus," he said.
Mr Swan believes his fifth budget will allow Australia to walk tall in the global economy.
"It will also show that we in Australia have done so much better than many other countries around the world, and what that means for Australia is that we can have confidence in our economic fundamentals," Mr Swan told reporters in Canberra.
In last November's mid-year budget review, Mr Swan forecast a $37.1 billion deficit for 2011/12 followed by a $1.5 billion surplus in 2012/13 - which would be the biggest fiscal turnaround in more than 50 years.
Shadow treasurer Joe Hockey questioned how Labor could be returning the budget to surplus after a series of budget leaks suggested it was spending more than it was saving.
"Wayne Swan doesn't know whether he is Santa Claus or the Christmas Grinch," he told reporters in Canberra.
"On the one hand the government is making large announcements and handing out money, and on the other hand they're talking about tough cutbacks."
Mr Swan deflected questions about Labor's planned company tax rate - legislation that was promised this week - and instead spruiked other steps to support small business, such as the "loss carry-back" initiative announced on Sunday.
This will allow firms to apply operating losses to a preceding year's income to reduce tax liabilities from July.
Mr Hockey wants to see the detail of Mr Swan's "loss carry-back" benefit before supporting it, claiming it is an idea stolen from the coalition.
"I wish they would stop stealing our initiatives. They lambasted it at the time. Now they're doing it," he said.
He also refused to say whether he would back a new education rebate.
He described the government's revamp of the education tax refund into twice-yearly payments as "dressing mutton up as lamb".
Mr Hockey said the policy change amounted to giving out money to people whether they needed it or not.
He said he would be looking carefully at the debt figures as a true reading of the budget position.