Australian Finance Minister Penny Wong on Monday renewed her warning of deep spending cuts in the upcoming mini-budget, as the government struggles to keep its pledge to return to surplus in the next financial year.
The budget bottom line has been hit hard by the global economic downturn and the uncertainty over the stability of Greece and Italy.
Senator Wong told ABC News that the federal government is determined to return to surplus on schedule in 2012/13.
However, she signaled that in order to achieve the surplus, the government will have to cut spending.
"We've seen a weakening of the world economy. That's going to impact on our economy and our budget. That means some difficult decisions in the upcoming mid-year outlook," Senator Wong said on Monday.
"The government is focused on fiscal discipline - we know that gives the Reserve Bank more room to cut interest rates as they did last week."
Meanwhile, Coalition finance spokesman Andrew Rob, who is skeptical the government will deliver a genuine surplus, said the federal government should have acted earlier to cut spending.
"If you look at the numbers, the spending, so much of it has been placed either side of 2012-13 so that they can manufacture a surplus... no-one will be fooled by that," Robb said.
"They've got to be real cuts in real areas so that we can see that this government is serious about putting us back into some sort of strong position."
The Mid-Year Economic and Fiscal Review (MYEFO) will be delivered by Treasurer Wayne Swan before the end of the year.
Swan has earlier signaled the MYEFO will reveal a lower- than- estimated growth rate for the Australian economy.