Federal budget to focus on jobs

Julia Gillard says moving more people off welfare and into work will be at the heart of her first federal budget as prime minister.

Treasurer Wayne Swan will outline a welfare overhaul and cuts to public spending when he gets to his feet in parliament at 7.30pm (AEST) on Tuesday to deliver his fourth budget.

A $2 billion mental health strategy and multi-billion-dollar natural disaster recovery package will also be unveiled.

Labor MPs have been told their job in coming weeks will be to convince voters that getting teenage mums, people with disabilities and the long-term jobless into work is good for them in a booming economy where unemployment is likely to average 4.5 per cent.

But the opposition says the government is all talk when it comes to tightening the purse strings, arguing it will not deliver on its promise of returning the budget to surplus by 2012/13.

The $350 billion budget - which will show a deficit of around $20 billion for 2011/12 - will include tighter requirements for welfare recipients, while 6.5 million low-income earners will get earlier access to a tax offset, worth $300 a year for someone earning $30,000.

"Every dollar counts, particularly when there are cost-of-living pressure around," Mr Swan said.

Ms Gillard told the Labor caucus the budget was an opportunity to broaden the political agenda - in the wake of a "scare campaign" by the opposition on carbon pricing and asylum seekers - to show the government's focus on health, education, participation and infrastructure.

"This is an historic opportunity to tackle social disadvantage," the Labor leader said.

Opposition Leader Tony Abbott said the budget would have a "hole in its heart" because it would not include the proposed carbon tax.

The government says the carbon tax won't be in the budget papers because it has not yet been finalised but it will be in a separate economic statement later in the year.

Mr Abbott says Labor's asylum seeker policy - including a $300 million deal with Malaysia and the expansion of onshore centres - is an example of it "haemorrhaging money".

The Australian Greens, whose support will be needed to get the budget legislation through the Senate after July, say the one per cent corporate tax cut for big business should be axed and the funding instead put into mental health and transport.

Small business is set to win, with a corporate tax cut from July next year and a tax break for vehicle purchases.

High-income earners are set to lose the private health insurance rebate, while also paying a one-off natural disaster recovery levy.

Families with teenagers will be able to get Family Tax Benefit Part A for longer.

More skilled migrants and a boost to vocational education and training will deliver workers to mining regions and infrastructure to areas hit by the summer floods and cyclone.

The independents and Greens, on whom the minority government relies, will win extra health, education and road funding for their seats.