The federal government unleashed a furious attack on the opposition after it dropped a bombshell and announced it would block the government's $42 billion lifeline to the economy.
The opposition's decision to dig in forced the government to negotiate with the Greens and other crossbench senators to find a way to get the six bills enabling the plan through parliament.
While negotiations were continuing late on Wednesday, it was likely a Senate inquiry would examine the bills on Thursday night and Friday, and report back to a specially convened Senate sitting next week.
As Prime Minister Kevin Rudd and Education Minister Julia Gillard visited a primary school in neighbouring Queanbeyan to spruik what they called the biggest school modernisation in history, the opposition laid down the gauntlet.
Opposition Leader Malcolm Turnbull had begun telling parliament the coalition intended to oppose passage of the bills because the $42 billion stimulus package - announced on Tuesday - was neither a responsible nor sustainable way to run the economy.
"We know this decision will not be popular, but it is the right decision," Mr Turnbull said.
"We consider that the package is poorly targeted, ill-thought through and irresponsible in today's economic climate."
He urged the government to allow the Senate to sit next week and scrutinise the package over several days.
But Mr Rudd dared opposition MPs to return to their electorates and explain why they're blocking cash handouts to struggling families and new money for local school upgrades and public housing.
"What you have embarked upon today is to vote against the biggest building program in every primary school in the nation," Mr Rudd said.
"You are doing so for one reason and one reason alone, and that is rank political expediency."
Treasurer Wayne Swan accused the opposition of voting in favour of higher unemployment.
The government introduced the bills early on Wednesday hoping they would be passed by both houses this week allowing for its $12.7 billion in handouts to flow from Centrelink next week.
It also wants the bills passed enabling its $28.8 billion of spending on schools, public housing, roads and rail, and home energy efficiency and small business tax breaks to get under way.
Mr Turnbull argues the package is too much and will load Australia up with debt for years.
He said there was little proof last October's $10.4 billion stimulus package had worked and that a second shot of between $15 billion and $20 billion was more appropriate.
But the government leapt on retail trade figures released by the Australian Bureau of Statistics on Wednesday which showed spending grew more strongly than expected with an increase of 3.8 per cent in December to a record $19.2 billion.
However, the government is now faced with a brief Senate inquiry into the bills where crossbench senators are hoping secretary of the Treasury Ken Henry will be called to give evidence.
Australian Greens leader Bob Brown said that while the opposition planned to block the package, his party would work to enhance it.
"The Greens are not going to be obstructionist. We are going to be creative and we expect the government to respond to that," Senator Brown said.
Independent senator Nick Xenophon said Australians would condemn the Senate if it did not scrutinise the bills.
"An inquiry would be a useful exercise to determine what the modelling is, what the alternatives are, and what the impact will be on the economy," Senator Xenophon said.
State premiers and territory leaders will fly into Canberra on Thursday for a special Council of Australian Governments (COAG) meeting with Mr Rudd to discuss implementation of the package.
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